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IRA Contribution Limits and Rules for 2024

Contributing to an individual retirement account (IRA) is a smart way to build your retirement savings while enjoying valuable tax benefits. However, it’s important to understand the contribution limits and rules to maximize your benefits and avoid penalties. In this article, we’ll cover the key points you need to know about IRA contribution limits, income limits, and deduction limits for 2024.

IRA Contribution Limits for 2024

For 2024, the contribution limits for IRAs are as follows:

• Under 50: $7,000
• 50 and older: $8,000

These limits apply to the total contributions you can make to all your IRAs combined.

Types of IRAs

Traditional IRAs

Traditional IRA contributions may be tax-deductible, reducing your taxable income. Your money grows tax-deferred, meaning you won’t pay taxes until you withdraw it in retirement. Withdrawals before age 59½ may incur a 10% early withdrawal penalty and be taxed as income. Required minimum distributions (RMDs) begin at age 73.

Roth IRAs

Roth IRAs are funded with after-tax money, allowing you to withdraw contributions tax- and penalty-free at any time. Investment earnings can also be withdrawn tax-free if you’re at least 59½ and have had the account for five years or more. RMDs do not apply to Roth IRAs unless it’s an inherited account.

IRA Income Limits for 2024

While there are no income limits for traditional IRAs, Roth IRAs have income limits that affect your contribution amount. Here are the Roth IRA income limits for 2024:

Tax Filing Status	Can I Contribute the Maximum Amount?	When Are Contributions Reduced?	When Can I No Longer Contribute?
Single, head of household, or married filing separately (didn’t live with spouse during 2024)	Yes, if income is less than $146,000	$146,000 to $160,999	$161,000+
Married filing jointly or qualified widow(er)	Yes, if income is less than $230,000	$230,000 to $239,999	$240,000+
Married filing separately	No	$1 to $9,999	$10,000+

Traditional IRA Deduction Limits for 2024

Traditional IRA contributions are tax-deductible if neither you nor your spouse is covered by a workplace retirement plan. If either of you is covered, the deduction phases out based on your tax filing status and modified adjusted gross income:

Tax Filing Status	Can I Take the Full Tax Deduction?	When Is the Deduction Reduced?	When Can I No Longer Take the Deduction?
Single or head of household (covered by workplace retirement plan)	Yes, if income is $77,000 or less	$77,001 to $86,999	$87,000+
Married filing jointly (you are covered by workplace retirement plan)	Yes, if income is $123,000 or less	$123,001 to $142,999	$143,000+
Married filing jointly (spouse is covered by workplace retirement plan)	Yes, if income is $230,000 or less	$230,001 to $239,999	$240,000+
Married filing separately (covered by workplace retirement plan)	No	Less than $10,000	$10,000+

What Happens if You Contribute Too Much to an IRA?

Overfunding your IRA can result in a 6% penalty for each year the excess remains in your account. To avoid this, you can:

• Remove the excess contributions and any earnings (note that removing money from a traditional IRA may result in taxes and a 10% early withdrawal penalty)
• Reassign the excess contributions to the following year

If you catch the mistake after the April tax filing deadline, you can file an amended tax return before October 15. Be sure to report any earnings. Waiting until after the October deadline will result in penalties.

The Bottom Line

Understanding IRA contribution rules helps you maximize your retirement savings and enjoy tax benefits. These guidelines ensure you contribute the right amount without facing penalties. Combining 401(k)s and IRAs can help you build a robust retirement fund. If you’re self-employed, consider additional retirement plans tailored to your needs.

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