The contribution limits for individual retirement accounts (IRAs) for the 2023 tax year is $7,500 if you're age 50 or older. This includes contributions for both Roth IRAs and traditional IRAs. But, there are restrictions that could affect how much you can contribute and what you can deduct on your tax return.
- The combined annual contribution limit for Roth and traditional IRAs for the 2023 tax year is $6,500 or $7,500 if you're 50 or older.
- That is a combined maximum, which means the limit is the same if you have more than one IRA.
- You can only contribute earned income to an IRA.
- Roth IRA contribution limits are reduced or eliminated at higher incomes.
- Traditional IRA contributions are deductible, but the amount you can deduct may be reduced or eliminated if you or your spouse are covered by a retirement plan at work.
IRA Contribution Limits
As noted above, there are limits to how much you can contribute to your retirement accounts, including IRAs. These limits are set and adjusted for inflation annually and are published by the Internal Revenue Service (IRS).
The maximum contribution limit for Roth and traditional IRAs for 2023 is:
- $6,500 if you're younger than age 50
- $7,500 if you're age 50 or older
You have until the filing deadline of the following year to contribute to an IRA. So you can contribute to your IRA for 2022 until Tuesday, April 18, 2023. The normal tax filing date, April 15, falls on a weekend in 2023, which usually pushes the deadline to the following Monday. In this case, the deadline is Tuesday because Emancipation Day falls on Monday, April 17, 2023.
You Can Only Contribute Earned Income
You must have earned income to contribute to an IRA. There are two ways to get earned income: work for someone else who pays you, owns, or runs a business or farm. The IRS has a list of what's included in earned income and what's excluded, which is highlighted in the table below.
|What's Included and Excluded from Earned Income|
|Wages and Salaries||Earnings and Profits From Property|
|Taxable Alimony and Separation Settlements||Annuity Income|
|Taxable Non-Tuition Fellowships||Deferred Compensation|
|Stipend Payments||Income from Some Partnerships|
|Non-Taxable Combat Pay||Amounts Excluded from Income|
The IRS considers income from alimony and separation settlements as earned income as long as the decrees are executed on or before Dec. 31, 2018. Income from partnerships is excluded if the services you provided didn't generate any material income. Amounts excluded from your income may include any foreign-earned income.
For 2023, you can contribute as much as $6,500 to an IRA or $7,500 if you're age 50 and older. But you must have enough earned income to cover the contribution.
If your earned income for the year is less than the contribution limit, you can only contribute up to your earned income. For example, if you earned $3,000, you can contribute a maximum of $3,000.
If you don't have earned income but your spouse does, you can open what's called a spousal IRA. These accounts allow a person with earned income to contribute on behalf of their spouse, who doesn't work for pay.
You can structure a spousal IRA as a traditional or Roth IRA. Either way, the spouse with earned income can contribute to the IRAs of both spouses, provided they have enough earned income to cover both contributions.
Roth IRA Income Limits
You can contribute to a traditional IRA regardless of how much money you earn. But you're not eligible to open or contribute to a Roth IRA if you make too much money. Here's a rundown of the 2023 Roth IRA income and contribution limits, based on your filing status and modified adjusted gross income (MAGI):
|2023 Roth IRA Income Limits|
|Filing Status||2023 Modified AGI||Contribution Limit|
|Married filing jointly or qualifying widow(er)||Less than $218,000||Full contribution|
|$218,000 to $227,999||Reduced|
|$228,000 or more.||Not eligible|
|Single, head of household, or married filing separately (and you didn't live with your spouse at any time during the year)||Less than $138,000||Full contribution|
|$138,000 to $152,999||Reduced|
|$153,000 or more.||Not eligible|
|Married filing separately (if you lived with your spouse at any time during the year)||Less than $10,000||Reduced|
|$10,000 or more||Not eligible|
There are still ways around the Roth IRA contribution limits. If you make a contribution to a nondeductible IRA, you can convert it to a Roth IRA. The same applies to nondeductible contributions made to a 401(k) plan.
Of course, any strategy with tax implications should be reviewed by a qualified tax professional.
If you make too much money, you may still be able to contribute to a Roth IRA using a strategy called a backdoor Roth IRA.
Traditional IRA Deduction Limits
Unlike Roth IRAs, there are no income limits with traditional IRAs. And you can deduct your contributions in full if you and your spouse don't have a 401(k) or some other retirement plan at work.
If either one of you is covered by a plan at work, however, the deduction may be reduced or eliminated. Here's the full rundown of IRA deduction limits for 2023:
|2023 Traditional IRA Deduction Limits|
|If your filing status is…||And your 2023 Modified AGI is...||Then you can take…|
|Single, head of household, qualifying widow(er), married filing jointly or separately and neither spouse is covered by a plan at work||Any amount||A full deduction up to the amount of your contribution limit|
|Married filing jointly or qualifying widow(er) and you're covered by a plan at work||$116,000 or less.||A full deduction up to the amount of your contribution limit|
|Between $116,000 and $136,000||A partial deduction|
|$136,000 or more.||No deduction|
|Married filing jointly and your spouse is covered by a plan at work||$218,000 or less.||A full deduction up to the amount of your contribution limit|
|Between $218,000 and $228,000.||A partial deduction|
|More than $228,000.||No deduction|
|Single or head of household and you're covered by a plan at work||$73,000 or less.||A full deduction up to the amount of your contribution limit|
|Between $73,000 and $83,000.||A partial deduction|
|More than $83,000.||No deduction|
|Married filing separately and either spouse is covered by a plan at work||Less than $10,000.||A partial deduction|
|$10,000 or more.||No deduction|
Modified Adjusted Gross Income (MAGI)
The IRS uses your MAGI when it comes to IRA limits. This number can be close (or identical) to your adjusted gross income (AGI). It takes your AGI and adds back certain deductions, including:
- Half of any self-employment taxes
- IRA contributions and Social Security
- Losses from a publicly-traded partnership
- Passive income or loss
- Qualified tuition expenses
- Rental losses
- Student loan interest
- The exclusion for adoption expenses
- The exclusion for income from U.S. savings bonds
- Tuition and fees
To calculate your MAGI, find your AGI from your tax return. It's on line 11 of Form 1040: U.S. Individual Tax Return Definition, Types, and Use. Then, use Appendix B, Worksheet 1 from IRS Publication 590-A to modify your AGI for IRA purposes.
What If You Contribute Too Much?
It's good to max out your IRA contributions. But if you go overboard, the IRS considers it an ineligible (or excess) contribution. If you contribute too much or contribute to a Roth when your income is too high, you'll owe a 6% penalty on the excess contribution each year until you fix the mistake.
The good news is that there are several ways to fix your mistake:
- Withdraw the excess contribution and any earnings on it before the April tax deadline.
- If you've already filed your tax return, remove the excess contribution and earnings and file an amended tax return by the October deadline.
- Apply the excess to next year's contribution. You'll still pay the 6% penalty this year, but you'll be set going forward.
- Withdraw the excess next year by Dec. 31. You'll pay the penalty for two years and then move on.
Of course, it's best to avoid excess contributions altogether. Be sure to pay attention to the IRS' contribution limits for the year, keep track of your contributions, and watch your income. Just because you were eligible to contribute last year, it doesn't mean you still are.
The Saver's Credit
Many people with low to moderate incomes aren't even aware of the saver's credit, a dollar-for-dollar reduction of the taxes you owe. It was put into place in the early 2000s.
You could earn a credit of 10%, 20%, or 50% of your contributions, up to a dollar amount of $2,000 ($4,000 if married filing jointly) as long as you're eligible. The saver's credit is available to individuals, heads of households, and joint filers who contribute to an IRA, 401(k), or any other qualified retirement account, and whose adjusted gross income falls within certain parameters. You must be over 18, not a full-time student, and not listed as a dependent on anyone else's tax return to qualify.
The income thresholds are adjusted annually. Here are the saver's credit rates for 2023:
|2023 Saver's Credit|
|Credit||Married Filing Jointly||Head of Household||All Other Filers|
|50%||AGI $43,500 or less||AGI $32,625 or less||AGI $21,750 or less|
|20%||$43,501 to $47,500||$32,626 to $35,625||$21,751 to $23,750|
|10%||$47,501 to $73,000||$35,626 to $54,750||$23,751 to $36,500|
|0%||More than $73,000||More than $54,750||More than $36,500|
A married couple with an AGI of, say, $60,000 could save $400 on their 2022 tax bill by contributing $2,000 to each ($4,000 total) of their IRAs (the 10% level). If they managed to contribute $4,000 with an income below $43,500, their tax credit would be $2,000 (50% of their contributions).
What Is the Contribution Deadline?
The contribution deadline for the previous year is the tax filing deadline. For example, the contribution deadline for 2022 is April 18, 2023.
Can a Minor Contribute to an IRA?
Yes, someone under the age of 18 can contribute to a Roth IRA or traditional IRA provided they meet the earned income requirements and do not earn over the income limits. However, opening the account will require a parent or guardian to be the custodian of the account.
What Is a Spousal IRA?
A spousal IRA is an IRA opened for a spouse with no earned income of their own, usually from providing unpaid labor to their household. To contribute to a spousal IRA, you must be married filing a joint tax return with enough earned income to cover both contributions.
Can You Get a Company Match on Your IRA Contributions?
If you have a SIMPLE IRA, yes you can get a company match. For a traditional IRA or Roth IRA, you cannot get a direct company match on your contributions, but some employers do offer incentives for employees who open or contribute to an IRA, like a gift card or other bonus.
The Bottom Line
Contribution limits apply to other types of IRAs, as well. For the self-employed and small business owners, the contribution limit for Simplified Employee Pension (SEP) IRAs and solo 401(k) plans is 25% of compensation, up to $61,000 in 2022.
If you have a Savings Incentive Match Plan (SIMPLE) IRA, you can make salary deferrals (salary reduction contributions) up to $15,500 for 2023. If you're age 50 or older, you can add an extra $3,500.
Any type of IRA is an excellent way to save for retirement. But to take full advantage of these accounts—and avoid any trouble or penalties—be sure to follow the rules for contribution, income, and deduction limits. The limits change periodically, so check back each year to make sure you comply.
Correction-March 7, 2022: Previous versions of this article listed alimony (spousal support) as unearned income. Since 2020, this form of income is now recognized as earned income.
Internal Revenue Service. "Retirement Topics - IRA Contribution Limits."
Internal Revenue Service. "401(k) Limit Increases to $22,500; IRA Limit Increases to $6,500."
Internal Revenue Service. "IRA Year-End Reminders."
Internal Revenue Service. "2022 Tax Filing Season Begins Jan. 24; IRS Outlines Refund Timing and What to Expect in Advance of April 18 Tax Deadline."
Internal Revenue Service. "Publication 590-A: Contributions to Individual Retirement Arrangements (IRAs)," Pages 6-7.
Internal Revenue Service. "Traditional and Roth IRAs."
Internal Revenue Service. "IRA FAQs."
Internal Revenue Service. "Amount of Roth IRA Contributions That You Can Make for 2023."
Internal Revenue Service. "IRA Deduction Limits."
Internal Revenue Service. "2023 IRA Deduction Limits - Effect of Modified AGI on Deduction if You Are Covered by a Retirement Plan at Work."
Internal Revenue Service. "2023 IRA Deduction Limits - Effect of Modified AGI on Deduction if You Are NOT Covered by a Retirement Plan at Work."
Nasdaq. "What Is Modified Adjusted Gross Income?"
Internal Revenue Service. "Publication 590-A Contributions to Individual Retirement Arrangements (IRAs)," Page 53.
Internal Revenue Service. "Form 1040 U.S. Individual Income Tax Return," Page 1.
Congressional Research Service. "The Retirement Savings Tax Credit: A Fact Sheet," Page 1.
Internal Revenue Service. "Retirement Savings Contributions Credit (Saver’s Credit)."
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Internal Revenue Service. "How Much Can I Contribute to My Self-Employed SEP Plan if I Participate in My Employer’s SIMPLE IRA Plan?"
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