There is a limit on how much one can contribute to an Individual Retirement Account (IRA) every year. The contributions made to an IRA is deductible if the taxpayer itemizes deductions. While the contribution limit is the same for everyone, the deduction limit depends on the modified adjusted gross income of the taxpayer.
IRA Contribution Limit 2021
The IRA contribution limits are adjusted by the Internal Revenue Service. Over the years, the IRA contribution limit has been increased by $500 every year. For 2021, it is anticipated that the contribution limit will increase to $6,500 for those who are under the age of 50. If you’re over the age of 50, the contribution limit will be $1,000 more with the catch-up bonus, increasing the total contribution limit to $7,500.
Whether or not you have another type of retirement account, the above contribution limits are the same for everyone in 2021. The IRA contribution limits are expected to be announced in the upcoming months at around November or December. The IRA contribution limit is the same regardless of your filing status but your filing status will have an effect on the deduction you can claim.
Deduction Income Limits
What portion of the IRA contributions can be deducted depends on the filing status, whether or not you or your spouse is covered by a retirement plan at work, and the modified adjusted gross income. Depending on these, you may be eligible for a full deduction, a partial deduction, or no deduction at all.
Check the tables below to see if you can claim a full or a partial deduction according to your filing status and modified adjusted gross income.
Covered by Retirement Plan at Work
|Filing Status||Modified Adjusted Gross Income||Eligible For|
|Single or Head of Household||Less than $65,000|
$65,001 to $75,000
$75,001 or more
|Married Filing Jointly or Qualifying Widow(er)||Less than $104,000|
$104,000 to $124,000
$124,001 or more
|Married Filing Separately||Less than $10,000|
$10,001 or more
If you’re married filing jointly and your spouse is covered by a retirement plan at work, you can claim a full deduction if the modified adjusted gross income is less than $196,000. If modified adjusted gross income is more than $196,000 but less than $206,000, you are eligible for a partial deduction. The IRA contribution deduction completely phases out if modified adjusted gross income is more than $206,000.
NOT Covered by Retirement Plan at Work
On the other hand, if you’re not covered by a retirement plan at work and your filing status is; single, head of household, qualifying widow(er), or married filing jointly or separately and your spouse isn’t covered by a plan at work, you can claim the full IRA contribution deduction without limits on the modified adjusted gross income.
If you’re with a spouse that is covered by a retirement plan at work, there might be a deduction limit. Those who are filing jointly with a spouse who’s covered by a retirement plan at work can claim the full deduction if the modified adjusted gross income is less than $196,000. A partial deduction is available if the modified adjusted gross income is between $196,000 and $206,000. Those with a modified adjusted gross income above $206,000 miss the IRA contribution deduction.
The $10,000 modified adjusted gross income also applies to those who are filing separately with a spouse who’s covered by a retirement plan at work. Having said that, if you and your spouse contribute to an IRA, filing jointly will surely grant you a higher deduction if you itemize. The above amounts are subject to change. If the IRS announces such changes on the income limits for the IRA deduction for 2021, we will keep you updated. In the meantime, you can learn more about modified adjusted gross income from our taxes page.