The limit for contributions to Roth and traditional IRAs for the 2021 tax year is $6,000, or $7,000 if you're aged 50 or older. This amount will be the same for the 2022 tax year, which remains unchanged from the 2020 tax year. 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 is $6,000 or $7,000 if you're age 50 or older for the 2021 and 2022 tax years.
- You can only contribute to an IRA if what you contribute comes from what is considered earned income.
- 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.
- Lower-income taxpayers may be eligible for the saver's credit if they contribute to an IRA.
2021 IRA Contribution Limits
For 2021, the most you can contribute to your Roth and traditional IRAs is a total of:
- $6,000 if you're younger than age 50
- $7,000 if you're aged 50 or older
Remember that the contribution amounts listed above remain unchanged for the 2022 tax year as well.
You have until the filing deadline of the following year to contribute to an IRA. So if you file your 2020 taxes, you had until April 15, 2021, to contribute for the 2020 tax year.
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, or own or run a business or farm.
Earned income includes money from wages, salaries, tips, bonuses, commissions, and self-employment income. Also, the IRS considers disability retirement benefits as earned income until you reach the age at which you could have received a pension or annuity if you didn't have a disability.
Some types of income don't count as earned income, including:
- Child support
- Income from rental property
- Interest and dividends from investments
- Pay you received while an inmate in a penal institution
- Retirement income
- Social Security
- Unemployment benefits
For 2021 and 2022, you can contribute as much as $6,000 to an IRA, or $7,000 if you're aged 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.
To be eligible for a spousal IRA, you must be married and file a joint tax return.
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 2021 and 2022 Roth IRA income and contribution limits, based on your filing status and modified adjusted gross income (MAGI):
|2021 and 2022 Roth IRA Income Limits|
|Filing Status||2021 Modified AGI||2022 Modified AGI||Contribution Limit|
|Married filing jointly or qualifying widow(er)||Less than $198,000||Less than $204,000||$6,000 ($7,000 if you're age 50 or older)|
|$198,000 to $208,000||$204,000 to $213,999||Reduced|
|$208,000 or more||$214,000 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 $125,000||Less than $129,000||$6,000 ($7,000 if you're age 50 or older)|
|$125,000 to $140,000||$129,000 to $143,999||Reduced|
|$140,000 or more||$144,000 or more||Not eligible|
|Married filing separately (if you lived with your spouse at any time during the year)||Less than $10,000||Less than $10,000||Reduced|
|$10,000 or more||$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 that has 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.
2021 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 2021 and 2022:
|2021 and 2022 Traditional IRA Deduction Limits|
|If your filing status is…||And your 2021 modified AGI is…||And your 2022 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||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||$105,000 or less||$109,000 or less||A full deduction up to the amount of your contribution limit|
|More than $105,000 but less than $125,000||More than $109,000 but less than $129,000||A partial deduction|
|$125,000 or more||$129,000 or more||No deduction|
|Married filing jointly and your spouse is covered by a plan at work||$197,000 or less||$204,000 or less||A full deduction up to the amount of your contribution limit|
|More than $197,000 but less than $207,000||More than $204,000 but less than $214,000||A partial deduction|
|$207,000 or more||$214,000 or more||No deduction|
|Single or head of household and you're covered by a plan at work||$66,000 or less||$68,000 or less||A full deduction up to the amount of your contribution limit|
|More than $66,000 but less than $76,000||More than $68,000 but less than $78,000||A partial deduction|
|$76,000 or more||$78,000 or more||No deduction|
|Married filing separately and either spouse is covered by a plan at work||Less than $10,000||Less than $10,000||A partial deduction|
|$10,000 or more||$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 8b of the newly redesigned Form 1040. 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 December 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's 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.
The income thresholds are adjusted annually. Here are the saver's credit rates for 2021 and 2022:
|2021 Saver's Credit|
|Credit||Married Filing Jointly||Head of Household||All Other Filers|
|50%||AGI $39,500 or less||AGI $29,625 or less||AGI $19,750 or less|
|20%||$39,001 to $43,000||$29,625 to $32,250||$19,750 to $21,500|
|10%||$43,000 to $66,000||$32,250 to $49,500||$21,500 to $33,000|
|0%||More than $66,000||More than $49,500||More than $33,000|
|2022 Saver's Credit|
|Credit||Married Filing Jointly||Head of Household||All Other Filers|
|50%||AGI $41,000 or less||AGI $30,750 or less||AGI $20,500 or less|
|20%||$41,000 to $44,000||$30,750 to $33,000||$20,500 to $22,000|
|10%||$44,000 to $68,000||$33,000 to $51,500||$22,000 to $34,000|
|0%||More than $68,000||More than $51,000||More than $34,000|
A married couple with an AGI of, say, $60,000 could save $400 on their 2021 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 $39,000, their tax credit would be $2,000 (50% of their contributions).
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 $58,000.
If you have a Savings Incentive Match Plan (SIMPLE) IRA, you can make salary deferrals (salary reduction contributions) up to $13,500 for 2021. If you're age 50 or older, you can add an extra $3,000.
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.
Internal Revenue Service. "Retirement Topics - IRA Contribution Limits." Accessed Dec. 3, 2021.
Internal Revenue Service. "What is Earned Income?" Accessed Dec. 3, 2021.
Internal Revenue Service. "Disability and the Earned Income Tax Credit." Accessed Dec. 3, 2021.
Internal Revenue Service. "Traditional and Roth IRAs." Accessed Dec. 3, 2021.
Internal Revenue Service. "IRA FAQs." Accessed Dec. 3, 2021.
Internal Revenue Service. "Amount of Roth IRA Contributions That You Can Make for 2022." Accessed Dec. 3, 2021.
Internal Revenue Service. "IRA Deduction Limits." Accessed Dec. 3, 2021.
Internal Revenue Service. "2022 IRA Contribution and Deduction Limits Effect of Modified AGI on Deductible Contributions if You are NOT Covered by a Retirement Plan at Work." Accessed Dec. 3, 2021.
Internal Revenue Service. "2022 Limitations Adjusted as Provided in Section 415(d), etc.," Pages 3-4. Accessed Dec. 3, 2021.
Internal Revenue Service. "Publication 590-A Contributions to Individual Retirement Arrangements (IRAs)," Page 53. Accessed Dec. 3, 2021.
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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?" Accessed Dec. 3, 2021.
Internal Revenue Service. "Retirement Topics - SIMPLE IRA Contribution Limits." Accessed Dec. 3, 2021.