IRA - Contribution Limits & Deductibility

MAGI is Modified Adjusted Gross Income, CESA is Coverdell Education Savings Account

Traditional IRA

Roth IRA

Coverdell Education Savings Account (CESA)

Eligibility

Anyone under age 70 ½ with earned income (or files jointly with a spouse who earns compensation).

Anyone at any age with earned income subject to income limits (or files jointly with a spouse who earns compensation).

For 2019 tax year, maximum yearly contribution phased out between MAGI of $122,000 and $137,000 (single), $193,000 and $203,000 (married filing jointly) and $1-$9,999 (married filing separately).

For 2018 tax year, maximum yearly contribution phased out between MAGI of $120,000 and $134,999 (single), $189,000 and $198,999 (married filing jointly) and $1-$9,999 (married filing separately).

Anyone, of any age, subject to certain income limits, as long as the designated beneficiary (the child for whom a contribution is made) is younger than 18.

Maximum yearly contribution phased out between MAGI of $110,000 (single) and $220,000 (joint).

Contribution Limits

2019 tax year: $6,000 per individual ($7,000 if age 50 or over) or 100 percent of your earned income, whichever is less.

2018 tax year: $5,500 per individual ($6,500 if age 50 or over) or 100 percent of your earned income, whichever is less.

Spousal Contributions: The maximum contribution amount can also be made to a nonworking spouse's IRA—subject to certain requirements.

Note: The maximum contribution amount can be deposited into a Traditional IRA, a Roth IRA or split between the two.

2019 tax year: $6,000 per individual ($7,000 if age 50 or over) or 100 percent of your earned income, whichever is less.

2018 tax year: $5,500 per individual ($6,500 if age 50 or over) or 100 percent of your earned income, whichever is less.

Spousal Contributions: The maximum contribution amount can also be made to a nonworking spouse's IRA—subject to certain requirements.

Note: The maximum contribution amount can be deposited into a Traditional IRA, a Roth IRA or split between the two.

$2000 per child per year under age 18 if contributor's MAGI is less than $110,000 (single) or $220,000 (joint). Eligibility to contribute is phased out for single filers with MAGI between $95,000 and $110,000 and for joint filers with MAGI between $190,000 and $220,000.

Contributions to CESAs are allowed regardless of Traditional or Roth IRA participation.

The deductibility of your contribution varies depending on your Modified Adjusted Gross Income (MAGI) and whether you have a retirement plan at work.

If you are covered by a retirement plan at work:

2019 tax year: Fully deductible if MAGI is less than $74,000 (single) or $123,000 (married filing jointly); partially deductible if MAGI is between $63,000 and $73,000 (single) or $101,000 and $121,000 (married filing jointly); $0-$10,000 (married filing separately). No deduction if MAGI is over $73,000 (single) or $121,000 (married filing jointly).

2018 tax year: Fully deductible if MAGI is less than $63,000 (single) or $101,000 (married filing jointly); partially deductible if MAGI is between $63,000 and $73,000 (single) or $101,000 and $121,000 (married filing jointly); $0-$10,000 (married filing separately). No deduction if MAGI is over $73,000 (single) or $121,000 (married filing jointly).

If either you or your spouse is covered by a retirement plan at work (but not both):

2019 tax year: Fully deductible if your MAGI is less than $189,000; partially deductible if MAGI is between $189,000 and $199,000; not deductible if MAGI is over $199,000.

2018 tax year: Fully deductible if your MAGI is less than $189,000; partially deductible if MAGI is between $189,000 and $199,000; not deductible if MAGI is over $199,000.

Neither spouse participates in a qualified plan: Contributions are deductible.

Not Deductible

Not Deductible

Tax Advantages

Taxes on gains, dividends and interest are deferred until money is withdrawn. No penalties on withdrawals if taxpayer is: 1) Age 59 1/2, 2) Buying a first home ($10,000 lifetime maximum), 3) Paying for college expenses or 4) Disabled or deceased.

Contributions may be withdrawn tax-free at any time. Earnings may be withdrawn tax-free if account has been open 5 years and taxpayer is: 1) Age 59 1/2, 2) Buying a first home ($10,000 lifetime maximum) or 3) Disabled or deceased. Contributions from conversion IRAs must remain on deposit for 5 years to avoid withdrawal penalty.

All withdrawals, including earnings, are tax-free for qualified education expenses.

Withdrawal Penalties

Withdrawals of contributions and earnings are subject to 10% penalty unless taxpayer is: 1) Age 59 ½, 2) Buying a first home ($10,000 lifetime maximum), 3) Paying for college expenses or 4) Disabled or deceased.

Withdrawals of earnings are subject to taxes and a 10% penalty unless account has been open 5 years and taxpayer is: 1) Age 59 ½, 2) Buying a first home or 3) Disabled or deceased. Withdrawals of earnings for college expenses will be subject to taxes but not penalties.

Withdrawals after the beneficiary reaches age 30 are subject to taxes and a 10% penalty, unless rolled over to a family member's Coverdell Education Savings Account.

Distribution Rules

Owner must start withdrawing by age 70½.

Owner is not required to take distributions at any age.

Funds must be withdrawn by the time the beneficiary child reaches age 30, or according to special needs exception defined by law.

Convert a Traditional IRA to a Roth IRA

Balance converted is taxable for the tax year in which the transfer occurs. Also, a withdrawal penalty applies if these funds are withdrawn within the first 5 years.

N/A

N/A