IRA Income Limits: Do You Know What You’re Contributing?

Note: the 2021 deadline for contributing to an IRA or Roth IRA is Monday, April 18, 2022. Contributions need to be designated specifically for 2021.

Most people have heard from their financial advisors they need to save for retirement. It is hammered in our heads to contribute to our IRAs every year, if possible. But what can be left out of that advice is whether or not you can contribute at all. The IRS limits your ability to make such contributions if your income is too high. You may be making ineligible contributions to your retirement accounts and not know it, which comes with a hefty price.

Traditional IRAs are beneficial because they might be able to reduce your current taxable income and shift the taxes you would owe on that money to a year in retirement when you will theoretically be in a lower tax bracket and, therefore, pay less in tax. However, if you and your spouse are covered by an employer plan, meaning if a retirement plan is offered for you to participate in at work, then you cannot make a tax deductible IRA contribution. If your modified adjusted gross income (MAGI) is above $125,000 for 2021 and you are married filing jointly (the limit depends on your filing status), then you are restricted from deducting the contribution. If you are married filing jointly and one spouse is not covered by an employer plan, then you are afforded the luxury of having a slightly higher limit on your MAGI for IRA contributions ($208,000 for 2021).

Roth IRAs

Not to be forgotten are Roth IRAs, which some see as a better alternative, as the withdrawals in the future as not taxable. They too come with their own income limits for direct contributions though; for 2021, any couple with a MAGI above $208,000 cannot contribute directly to a Roth IRA. However, there are strategies to make Roth IRA contributions if you happen to have made more than the limit. More information on Backdoor Roth IRAs can be found here.

What You Need to Know About Excess Contributions to Your IRA or Roth IRA

If you happen to make an IRA or Roth IRA contribution in a year you were not supposed to, then backing out that excess contribution becomes paramount. Any excess contribution is taxed at 6% per year as long as the excess amount remains in the IRA. Since the penalty can be steep, making sure of the eligibility of a contribution is important. If there are any uncertainties about the situation, the advice of a financial advisor should be sought out.

Contribution Limit

Age 50 or older to catch up



IRA Deductibility Phase-Out (based on MAGI) – Both spouses covered by employer plan

Married filing jointly

Married filing separately


$105,000 – $125,000

$0 – $10,000

$66,000 – $76,000

One spouse covered by employer plan

Non-participating spouse is eligible if MAGI falls between

$198,000 – $208,000

Neither Spouse Covered by Employer Plan

No income limit

Roth IRA Deductibility Phase-Out (based on MAGI)

Married filing jointly

Married filing separately


$198,000 – $208,000

$125,000 – $140,000

Contact us if you have any questions, and we’ll be in touch.

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