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IRA Contribution Limits and Catch-Up Contributions

For those who annually contribute to their IRA account and wish they could contribute more, there is good news. The annual contribution limit is inflation adjusted each year and is slowly increasing. Taxpayers 50 and older are allowed larger contributions through so-called “make-up” provisions (see table below).

The contribution limit for Traditional IRA Accounts for taxpayers that do not have a qualified plan with their employer is as follows.

IRA Contribution Limits

Year

2006-2007

2008-2011

2012

Under Age 50

4,000

5,000

Inflation Adjusted

Age 50 & Over

5,000

6,000

Inflation Adjusted



However, if a taxpayer is an active participant in an employer’s pension plan or a self-employed pension plan, the deductible amount will be ratably phased out if their income for the year (AGI) is within the phase out range and not allowed at all if the AGI exceeds the phase out range (see the table below). The phase-out ranges are adjusted annually for inflation.

Phase-Out Ranges

Filing Status

2010

2011

Single & Head of Household

56,000 - 66,000

56,000 - 66,000

Married Filing Jointly

89,000 - 109,000

90,000 - 110,000

Married Filing Separately

0 - 10,000

0 - 10,000

 

Special rule for a nonactive participant spouse - The limits for deductible IRA contributions do not apply to the spouse of an active participant. Rather, the maximum deductible IRA contribution for an individual who is not an active participant but whose spouse is an active participant, is phased out for the non-active participant if their combined AGI is between the inflation adjusted limits for the year as illustrated in the table below.


Nonactive Spouse Phase-Out Ranges

Year

2010

2011

Phase-Out Range

167,000 - 177,000

169,000 - 179,000