Traditional IRA:
- Tax Deductible (subject to income limitations if you or your spouse are covered by a retirement plan at work see table below)
- No income limits on contributions (though your contribution may not be tax deductible)
- Ideal for taxpayers above the Roth IRA income limits, older taxpayers (fewer years for earnings growth), taxpayers with higher tax rates when contributing, or taxpayers that expect lower tax rates in retirement.
Roth IRA:
- Contributions are NOT tax deductible
- Distributions (amounts withdrawn) are Not Taxable if criteria are met
- Income Limits Apply to Contributions (see table below)
- Ideal for younger taxpayers (more years for earnings growth), taxpayers with lower tax rates when contributing, taxpayers that expect higher tax rates in their future.
Info that applies to Both Traditional & Roth IRA Accounts:
- IRA contributions can be made in addition to retirement plan contributions made through employers, such as 401k or Simple IRA contributions
- IRA accounts are setup by individual taxpayers (separate from plans offered through employers)
- Requires earned income by you or your spouse
- Earnings Grow Tax-Free
- $6,500 contribution limit (for traditional & Roth IRA accounts combined) per tax year plus an additional $1,000 for taxpayers that are 50 years of age or older for the 2023 tax year.
- Contributions can be made by the due date of your tax return for the prior tax year (2023 contributions can be made by April 15, 2024). Extensions do not apply.
Traditional IRA – How Much can you Deduct?
While income limits do not apply to how much you can contribute to a traditional IRA, there are income limits that apply to how much you can deduct if you or your spouse are covered by a retirement plan at work. Check the table below to determine how much you can deduct if you are covered by a retirement plan at work.
Filing Status | Deduction Phased out on Income Between |
Single or Head of Household | $73,000 – $83,000 |
Married Filing Jointly | $116,000 – $136,000 |
Married Filing Separately | $0 – $10,000 |
Roth IRA – How Much can you Contribute?
Income limits apply to Roth IRA contributions based on your filing status. Check the table below to determine how much you can contribute.
Filing Status | Contributions are Phased out on Income Between |
Single, Head of Household, or Married Filing Separately and you did not live with your spouse during the year | $138,000 – $153,000 |
Married Filing Jointly | $218,000 – $228,000 |
Married Filing Separately and you lived with your spouse during the year. | $0 – $10,000 |
Further Reading:
See IRS Publication 590A for information about IRA contributions
See IRS Publication 590B for information about IRA distributions
Contact me to discuss this topic in further detail
Please note: the information on this website is intended to provide general advice to start the discussion with your tax professional. The information on this website may not apply to your specific situation. Only an experienced professional with the details of your specific situation can advise you on making the best decision. Contact me or your tax professional to discuss the information on this site to make an informed decision.