The deadline for making contributions to your 2023 Individual Retirement Account (IRA) is April 15, 2024. Below we have included some important reminders and updates. For 2023 and 2024 the contribution limits are as follows:
|
Year |
Under Age 50 |
Age 50 and Older |
| 2023 | $6,500 | $7,500 |
| 2024 | $7,000 | $8,000 |
Your IRA contribution is limited to your ‘taxable compensation’ (wages, salaries, 1099 commissions, or self-employment income). So if you have no ‘taxable compensation’ you cannot make a contribution.
If single and married filers are NOT covered by an employer-sponsored retirement plan, they can deduct the full amount of Traditional IRA contributions. If single and married filers are covered by an employer-sponsored retirement plan, please note the following deduction limits:
Traditional IRAs — 2023 vs. 2024 Deduction Limits
Chart Source: IRS.gov / AARP
A Traditional IRA provides an upfront tax deduction depending on your modified adjusted gross income (above) and may be deductible or non-deductible. If you file a joint return, you and your spouse can each contribute to an IRA even if only one of you has taxable compensation. These funds grow tax deferred and will be subject to tax based on your income tax bracket in the year of withdrawal. At age 59 ½ the funds can be withdrawn penalty free and at age 73 the IRS requires that you withdraw a portion based on life expectancy tables (referred to as RMD-Required Minimum Distribution rules).
Roth IRAs have contribution limits regardless of whether or not you are covered by an employer-sponsored retirement plan. See the chart summary below for Roth IRA limits:
Roth IRAs — 2023 vs. 2024 Deduction Limits
Chart Source: IRS.gov / AARP
A Roth IRA provides no upfront tax deduction but grows tax free for life and is not subject to the Required Minimum Distribution rules (RMD). Contributing to a Roth IRA often makes sense when you are in lower tax brackets or when you are looking to diversify the mix of tax free and tax deferred retirement funds that you have.
At Newburg CPA, we can help you navigate the retirement landscape. Feel free to contact us at info@newburg.com and visit www.newburg.com .