IRA - Contribution Limits & Deductibility
MAGI is Modified Adjusted Gross Income, CESA is Coverdell Education Savings Account
For questions regarding the tax implications of your IRA account(s), please consult a tax professional.
Traditional IRA |
Roth IRA |
Coverdell Education Savings Account (CESA) |
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Eligibility |
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Anyone at any age with earned income (or files jointly with a spouse who earns compensation). If you are covered by a retirement plan at work: 2023 tax year: deductions for contributions are reduced (phased out) if MAGI is between $73,000 and $83,000 (single) or $116,000 and $136,000 (married filing jointly) or less than $10,000 (married, filing separately). 2022 tax year: deductions for contributions are reduced (phased out) if MAGI is between $68,000 and $78,000 (single) or $109,000 and $129,000 (married, filing jointly) or less than $10,000 (married, filing separately). |
Anyone at any age with earned income subject to income limits (or files jointly with a spouse who earns compensation). 2023 tax year: maximum yearly contribution limits are reduced (phased out) if MAGI is between $138,000 and $153,000 (single) or $218,000 and $228,000 (married, filing jointly) or less than $10,000 (married, filing separately). 2022 tax year: maximum yearly contribution limits are reduced (phased out) if MAGI is between $129,000 and $144,000 (single) or $204,000 and $214,000 (married, filing jointly) or less than $10,000 (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 $95,000 (single) and $190,000 (joint). Taxpayers with MAGI above $110,000 and $220,000. |
Contribution Limits |
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2023 tax year: $6500 per individual ($7500 if age 50 or over) or 100 percent of your earned income, whichever is less. 2022 tax year: $6,000 per individual ($7,000 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. |
2023 tax year: $6500 per individual ($7500 if age 50 or over) or 100 percent of your earned income, whichever is less. 2022 tax year: $6,000 per individual ($7,000 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. |
$2,000 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. |
Deductibility |
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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: 2023 tax year: Fully deductible if MAGI is less than $73,000 (single)or $136,000 (married filing jointly); partially deductible if MAGI is between $$73,000 and $83,000 (single) or $116,000 and $136,00 (married filing jointly), $0-$116,000 (married filing separately); No deduction if MAGI is over $83,000 (single) or $136,000 (married jointly). 2022 tax year: No changes from 2021. If either you or your spouse is covered by a retirement plan at work (but not both): 2023 tax year: Modified AGI limits for certain married individuals are increased. If your spouse is covered by a retirement plan at work and you aren’t, and you live with your spouse or file a joint return, your deduction is phased out if your modified AGI is $218,000- $228,000. If your MAGI is $228,000 or more, you can’t take a deduction for contributions to a traditional IRA. 2022 tax year: Fully deductible if your MAGI is less than $198,000; partially deductible if MAGI is between $198,000 and $208,000; not deductible if MAGI is over $208,000. Neither spouse participates in a qualified plan: Contributions are fully deductible up to the amount of the contribution limit. |
Not Deductible |
Not Deductible |
Tax Advantages |
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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 |
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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 |
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Owner must start withdrawing by age 73. |
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 |
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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 |