You can contribute any amount to a either a “traditional” IRA or “Roth” IRA and both types in the same year, but your total contributions cannot exceed either of the annual limit for contributions or your earned income for that year if it is less than the annual limit. For the 2015 tax-year, the maximum contribution limit is $5,500. If you are age 50 or above an additional “catch-up” contribution is permitted, which if fully utilized increases the maximum annual contribution to $6500.

Earnings Requirement

To be eligible to contribute to an IRA account for any year, you must have some “earned income” in that same year. Qualifying income can be from any of the following: wages that are reported on a W-2, self-employment income from a business or farm, and alimony. If you and/or your spouse file a joint tax return, only one of you must have taxable compensation, such as wages, salaries, commissions, tips, bonuses, or net income from self-employment. Taxable alimony and separate maintenance payments received by an individual are treated as compensation for IRA purposes.

Age Requirement

There is no minimum age restriction for making IRA contributions, but there is a maximum for making “traditional IRA” contributions. For this IRA type you must be under age 70.5 at the end of the tax-year to be eligible to make a contribution for that year.

“Roth IRAs” are treated differently in that there is no maximum age restriction for making future contributions.

Contribution Deadline

IRA contributions can be made at any time during the calendar year and beyond until the first deadline for filing your tax return. For 2015 contributions that deadline is April 15, 2016.

Taking an Income Tax Deduction for IRA Contributions

Contributions to a “traditional IRA may not always be fully or partially deductible from your taxable income. If you also participate in a retirement plan at work, such as a 401(k) plan, 403(b) plan, or pension plan, your eligibility for a deduction will be limited if your income exceeds set levels. For this purpose, “modified adjusted gross income” is used. It includes Social Security income, but excludes any deductions for IRAs, savings bond interest, adoption assistance income, the domestic production deduction, the deduction for student loan interest, the deduction for tuition and fees, and foreign earned income and housing exclusions (including housing deduction). The passive loss limitations also apply.

2015 Deduction Limits for Traditional IRAs if Covered by a Retirement Plan at Work

Modified Adjusted Gross Income

Filing Status (Partial Deduction) (No Deduction)

Single $61,000 to $71,000 $71,000+

Head of Household $61,000 to $71,000 $71,000+

Qualifying Widow/er $98,000 to $118,000 $118,000+

Married Filing Separately (live together) $0 to $10,000 $10,000+

Married Filing Separately (live apart) $61,000 to $71,000 $71,000+

Married Filing Jointly (covered by $98,000 to $118,000 $118,000+

retirement plan)

Married Filing Jointly (not covered $183,000 to $193,000 $193,000+

by retirement plan, but spouse is covered by retirement plan)

(Note: If your income falls below the range that limits your deduction, then a full deduction is permitted. If some or all of your contribution to a "traditional IRA is not deductible due to participation in a retirement plan at work, you should consider contributing the non-deductible portion to a "Roth IRA" if your income is within the limit allowed for "Roth IRA" eligibility. For individuals filing as "single" modified adjusted gross income must be below $131,000 and for married individuals filing "jointly" it must be below $193,000.)

Greg Tinaglia

(Last updated on 06.26.2015)