If you are planning on contributing to a traditional or Roth IRA in 2013, you need to know about the contribution and income limits, first to see if you can contribute, then to see how much.

First of all, you need to have earned income of at least 100% of your IRA contribution. If single, you have to have $5500 in earned income, if married you need $11000 to make maximum IRA contributions, both for traditional and Roth. If you are over 50, you need another $1000 in earned income if single, $2000 if married to qualify for the catch up contribution.

If you are planning to contribute to a Roth IRA, you can contribute $5500 if single and $11000 if you are married. Plus you can each contribute another $1000 if you are over 50 (the ’catchup contribution’.) The only requirement for a Roth IRA is your Modified Adjusted Gross Income – if single, head of household or married filing separately (and you didn’t live with your spouse) you must have MAGI under $127,000, if married filing joint your MAGI must be under $188,000 to qualify for any type of Roth IRA contribution. If you are married filing separately and you live with your spouse, your MAGI needs to be under $10,000 to make a contribution. What is Modified Adjusted Gross Income? See this explanation in 20something Finance by G.E. Miller:

http://20somethingfinance.com/adjusted-gross-income-agi-vs-modified-adjusted-gross-income-magi/

With a Roth contribution there is no deduction up front, but keeping the Roth for the longer of five years or when you turn 59 1/2 will allow you to withdraw all earnings on the account tax free.

If you want to contribute to a traditional IRA instead and have the earned income above, congratuations, you can. The only question is will your contribution be deductible or will you have to make a nondeductible contribution and keep track of basis to reduce taxability when you start taking distributions? If you are married filing jointly or a qualified widower, there is no income limit if you or you wife do not have a qualified retirement plan at work. If one of you has a plan, that person can only make a deductible contribution if your MAGI is under $115,000, but the spouse can make a deductible contribution if your MAGI is under $188,000. Single people or head of household have no income limit if they don’t have a qualified plan, if they do, their MAGI must be under $69,000 to make a deductible contribution. If you filed married separately, you have no income limit if you or your spouse don’t have a qualified plan at work, but your MAGI must be under $10,000 to take a deductible contribution if you or your spouse has a qualified plan at work.

I know this all sounds a little confusing, so you can call or email me if you want more information. See my contact information below.

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