Green Card Holders and U.S. Taxation
February 23, 2024
Controlled Groups
February 23, 2024

February 24, 2024 | read

Contributing to Traditional and Roth IRAs

Brandon Hall

Contributing to Traditional and Roth IRAs

Every taxpayer can contribute to an IRA each year. The annual limits, for 2018, per taxpayer, are $5,500 and are increasing to $6,000 in 2019. If you’re aged 50 and older you get to contribute an extra $1,000 ($6,500 total for 2018 and $7,000 total for 2019). Contributions must be made by April 15 of each year.

It’s important to understand that each taxpayer can make the above-stated contributions. So if you are married filing joint, both you and your spouse can each make the above contributions to your own IRAs.

More On Contribution Limits 

The amounts you can contribute depends on whether you are covered by a retirement plan at work or not, and what your modified AGI (MAGI) is for the year. Below are MAGI and deductible contribution limits for Traditional IRAs:

2018 MAGI and Contribution Limits (if you ARE covered by a retirement plan at work).

2018 MAGI and Contribution Limits (if you ARE NOT covered by a retirement plan at work).

2019 MAGI and Contribution Limits (if you ARE covered by a retirement plan at work).

2019 MAGI and Contribution Limits (if you ARE NOT covered by a retirement plan at work).

Take note of the “no deduction” MAGI amounts if you are interested in contributing to a traditional IRA. If your MAGI is above that threshold, you’re limited to either contributing to a Roth or making a non-deductible IRA contribution.

Roth IRAs have a higher MAGI contribution limit. As a result, we find clients with higher MAGIs contributing to Roth IRAs rather than traditional IRAs. Here are the Roth MAGI limits for 2018and 2019. You’ll notice that when your MAGI increases above $199,000 and $203,000 for married filing joint taxpayers, you are phased out of making Roth contributions.

When your MAGI phases you out of being able to make a Roth contribution, the only option you’ll have left is to make a non-deductible traditional IRA contribution. But that’s not such a bad thing, especially if you want to employ this strategy.

You can also check out our article on Solo 401(k)s and Self Directed IRAs and our podcast episode with a retirement account expert.

For more information, check out the IRS’s webpage here: https://www.irs.gov/retirement-plans/plan-participant-employee/retirement-topics-ira-contribution-limits.

Have questions?

Our Tax Smart Investor Plus subscription includes Live Q&As where you can get your questions answered by our seasoned tax experts.