What are the rules for IRA contributions?

February 25, 2019


It depends on what kind of IRA you're talking about. Traditional IRAs and Roth IRAs are each subject to different contribution rules.

You're allowed to contribute up to $5,500 to a traditional IRA in 2018 (unchanged from 2017), as long as you're under age 70½ and you have earned income. In addition, if you're age 50 or older, you can make an extra "catch-up" contribution of $1,000 in 2017 and 2018. You can make your annual contribution up to April 15 of the following year, either in a series of payments or in one lump sum. The beauty is that practically anyone who has a paying job can set up and contribute to a traditional IRA. Also, if you meet certain conditions, you may be able to contribute an additional $5,500 in 2017 and 2018 to an IRA in your spouse's name (plus an additional $1,000 catch-up contribution if your spouse is age 50 or older), even if your spouse has little or no income. However, whether or not you can deduct your traditional IRA contributions will depend on several factors, such as your income, your tax filing status, and whether you or your spouse is covered by an employer-sponsored plan. You may be able to deduct all, a portion, or none of your contribution for a given year. You may even qualify for a partial tax credit.

On the other hand, contributions to Roth IRAs are never tax deductible, but a tax credit may be available and qualifying distributions will be tax free. Also, even though the same dollar caps on yearly contributions apply to Roth IRAs ($5,500 in 2017 and 2018, $1,000 catch-up contribution if age 50 or older), not everyone will qualify to take full advantage of a Roth IRA. The amount you can contribute to a Roth IRA (if anything) will be based on your income and filing status. If you do qualify, you may be able to continue contributing to a Roth IRA after age 70½ — a feature traditional IRAs don't offer. As with traditional IRAs, you may be able to contribute to a Roth IRA on behalf of your spouse.

Keep in mind that your combined annual contribution to all of your IRAs in any given year — Roth and traditional — cannot exceed the overall contribution limit of $5,500 ($6,500 if you're age 50 or older).