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Traditional IRA Contribution Limits for 2023-2024
By Austin Kilham | Updated December 07, 2023
A traditional IRA is a tax-advantaged investment account that helps individuals save for their retirement. The contributions a person makes may be fully or partially tax-deductible, and the money inside the account grows tax-deferred. Individuals are taxed at regular income tax rates when they make withdrawals after age 59½.
There are limits, however, to how much one can contribute to a traditional IRA and who can deduct their contributions.
Here’s what you need to know about traditional IRA contribution limits.
Contribution Limits for Traditional IRAs 2024
For 2024, the contribution limits for traditional IRAs are increasing by $500 from 2023:
| 2024 Traditional IRA Contribution Limits | |
|---|---|
| For individuals under age 50 | $7,000 |
| For individuals 50 and older | $8,000 |
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Contribution Limits for Traditional IRAs 2023
Contributions to a traditional IRA are not limited by how much you earn each year, but the IRS does limit the amount of money you can contribute to your traditional IRA annually. Here’s a look at the traditional IRA contribution limits for 2023.
| 2023 Traditional IRA Contribution Limits | |
|---|---|
| For individuals under age 50 | $6,500 |
| For individuals 50 and older | $7,500 |
Traditional IRA Tax Deduction Limits 2023-2024
While income doesn’t determine eligibility to contribute to a traditional IRA, it can have an impact on deductible contributions if an individual or their spouse has a retirement plan at work and their income exceeds a certain level.
Deductibility Based on Income Levels and Filing Status
This chart outlines traditional IRA contributions limits in 2023 and 2024 if you are covered by an employer-sponsored retirement plan.
| Filing Status | 2023 Modified Adjusted Gross Income (MAGI) | 2024 Modified Adjusted Gross Income (MAGI) | Deduction Amount |
|---|---|---|---|
| Single | $73,000 or less | $77,000 or less | Full deduction |
| More then $73,000 and less than $83,000 | More than $77,000 and less than $87,000 | Partial deduction | |
| $83,000 or more | $87,000 or more | No deduction | |
| Married filing jointly | $116,000 or less | $123,000 or less | Full deduction |
| More than $116,000 but less than $136,000 | More than $123,000 but less than $143,000 | Partial deduction | |
| $136,000 or more | $143,000 or more | No deduction | |
| Married filing separately | Less than $10,000 | Less than $10,000 | Partial deduction |
| $10,000 or more | $10,000 or more | No deduction |
Individuals who are not covered by an employer sponsored retirement plan but have a spouse who is, are also subject to a phase out for contribution deduction, as shown in the chart below.
| Filing Status | 2023 Modified Adjusted Gross Income (MAGI) | 2024 Modified Adjusted Gross Income (MAGI) | Deduction Amount |
|---|---|---|---|
| Married filing jointly with a spouse covered by a workplace retirement plan | $218,000 or less | $230,000 or less | Full deduction |
| More than $218,000 but less than $228,000 | More than $230,000 but less than $240,000 | Partial deduction | |
| $228,000 or more | $240,000 or more | No deduction | |
| Married filing separately with a spouse covered by a workplace retirement plan | Less than $10,000 | Less than $10,000 | Partial deduction |
| $10,000 or more | $10,000 or more | No deduction |
Understanding MAGI and Its Impact on Deductibility
Individuals can still contribute to a traditional IRA if their modified adjusted gross income (MAGI) exceeds the limits for deductible contributions (as shown in the charts above). Though they will not get an immediate tax benefit, their contributions will still grow tax-deferred, which can help boost retirement savings.
Eligibility Criteria for Traditional IRA Contributions
There are some criteria regarding income eligibility that you should be aware of as you’re getting ready to make contributions to a traditional IRA.
Income Requirements for Traditional IRAs
Traditional IRAs have no income limit. In other words, no matter how much money you make, you can contribute to a traditional IRA. By contrast, Roth IRAs do have income limits.
However, contributions to traditional IRAs must be made with earned income paid to you by an employer or earned as the owner of a business. The following are IRS-approved sources of earned income:
• Wages, salaries, and tips from which federal income taxes are withheld
• Income from a job from which an employer did not withhold taxes, such as freelance work
• Self-employed income Income that does not qualify as earned income includes:
• Interest and dividends
• Pensions or annuities
• Social Security benefits
• Unemployment benefits
• Alimony
• Child support
• Pay earned as an inmate in a prison
Age-Related Considerations and Limits
Individuals age 50 and older can make catch-up contributions to their traditional IRA. Catch-up contributions may allow older individuals to save more as they get closer to retirement. This could help them reach their retirement goals and cover typical retirement expenses.
For 2023 and 2024, the catch-up contributions for a traditional IRA are an additional $1,000 on top of the annual contribution limit. So for 2023, those 50 and up can make a total contribution of $7,500 to their traditional IRA, and in 2024, they can contribute a total of $8,000.
Navigating Excess Contributions and Penalties
Mistakes happen: From time to time individuals may accidentally make excess contributions to their IRAs. For instance, they could either deposit more than the annual contribution limit or make a mistake while rolling over funds.
What Happens If You Contribute Too Much?
This error can be costly. Excess funds are taxed at 6% for each year they remain in the IRA. However, individuals can avoid this tax by withdrawing excess contributions by the due date of their individual tax return. They must also withdraw any income earned on the excess funds during that period. However you will need to report those earnings as income on your tax return. And you may have to pay a 10% penalty for early withdrawal of the earnings if you are under age 59½.
Strategies to Avoid Excess Contributions
To avoid accidentally contributing too much to your traditional IRA, find out the contribution limits for the year in question and make sure you contribute no more than that amount.
It’s also important to be aware that the IRA contribution limit is a combined maximum for all the IRAs you may have, including Roth IRAs. So your contributions to a traditional IRA and a Roth IRA cannot exceed the overall yearly contribution limit, which is $6,500 in 2023 and $7,000 in 2024 for those under age 50.
Spousal IRAs and Contribution Rules
Individuals who don’t have earned income themselves, but have a spouse that does, can open an IRA called a spousal IRA. This type of IRA allows the spouse with income to contribute to it on behalf of the spouse without earned income.
Understanding Spousal IRA Contributions
A spousal IRA is a separate IRA for a spouse who doesn’t earn an income. It is not a joint account. It allows married couples who file jointly to each have their own separate IRAs and contribute the maximum allowed amount to each account.
Eligibility and Contribution Limits for Spouses
A couple is required to file a joint tax return to be eligible for spousal IRA contributions. The spouse with earned income must earn enough to cover the contributions in both accounts — their own and the spousal IRA.
Spousal IRAs also have the same income limits as traditional IRAs. You can find more information on spousal IRAs at irs.gov.
FAQ
Is there an income limit to contribute to a traditional IRA?
No, there is no income limit to contribute to a traditional IRA. Individuals, regardless of their income, can contribute $6,500 to a traditional IRA in 2023 (or $7,500 if they are age 50 or older), and $7,000 in 2024 (or $8,000 if they are 50 or older).
However, while income doesn’t determine eligibility to contribute to a traditional IRA, it can affect deductible contributions if you or your spouse has a retirement plan at work and your income exceeds a certain level.
What are the rules for a traditional IRA?
The rules for a traditional IRA include these: you must have earned income to contribute to a traditional IRA, and the amount you contribute annually must not be more than you earned for the year in question. Also, the contribution limits for a traditional IRA are $6,500 in 2023 ($7,500 for those age 50 and up), and $7,000 in 2024 (or $8,000 for those 50 and older).
Does contributing to a traditional IRA reduce taxable income?
Contributing to a traditional IRA may reduce your taxable income for the year. However, some or all of your contributions may be ineligible for tax deduction depending on your income and whether or not you or a spouse is covered by a retirement plan at work.
Can I max out a 401(k) and a traditional IRA in the same year?
Yes, you can max out a 401(k) and a traditional IRA in the same year. You can contribute up to $22,500 to a 401(k) in 2023 (or up to $30,000 for those age 50 and older), and you can also contribute up to $6,500 in a traditional IRA (or up to $7,500 for those 50 and older) in 2023.
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