Unfortunately for many taxpayers, 2015 will not herald any rise in the traditional #ira contribution limits. The limit is still restricted to $5,500, the same as the traditional IRA contribution limits in 2014.
To many observers, this statistic came as a kind of surprise as the maximum contribution limit for a 401(k) was increased in 2015. It has to be remembered that contribution limits are applicable to traditional #iras and also to #roth IRAs. It is to be noted that you can have both these kinds of accounts, but the maximum contribution per year is a combination of both.
The maximum contribution limits are adjusted by the IRS as per changes in the CPI or Consumer Price Index. It was determined that the yearly rise in CPI was quite low to justify any changes to the maximum.
IRA contribution limits from a historical perspective
2013 was the last year when the traditional IRA contribution limits were increased. This is not surprising as inflation was very low during the period. When the limits are increased by the IRS, it is generally done in increments of $500. When talking about a maximum of $5,500, an increase of $500 comes to approximately 10 percent.
Maximum applicable IRA catch up contribution for 2015
For individuals aged 50 and above, the IRA catch up contribution for 2015 will remain the same, at an extra $1,000. As $5,500 is standard contribution, it means that the total contribution comes to $6,500- adding standard and match up contributions. You can be deemed eligible for a catch up contribution in the event you reach 50 years of age any day during the calendar year.
Traditional IRA income limits for 2015
If you want to limit your tax liability, then there is no better way than through an IRA. You could restrict your liabilities both in present (Traditional IRA) as also in future (Roth IRA). However, keep in mind that contribution phaseout limits exists which are dependent on the income you make. The great news is that such limits will rise in 2015, even if there was no contribution increase.
If your employer has a retirement plan and you subscribe to it:
Head of household or a single: In case your MAGI touches $61,000 or is less than that, you enjoy a full deduction. It is surpasses $61,000, but lower than $71,000, you get partial deduction. No deduction is applicable of it exceeds $71,000.
Qualified widow/widower or married filing jointly: In case your MAGI touches $98,000 or is less than that, you enjoy a full deduction. It is surpasses $98,000, but lower than $118,000, you get partial deduction. No deduction is applicable of it exceeds $118,000.
Married filing separately: In case your MAGI does not touch $10,000, you can take partial deduction. No deduction is possible if it exceeds $10,000.
If you have a number of 401(k)s sitting idle for a long time, it makes sense to consolidate them and put them into IRAs. The latter carry lower fees. Make maximum use of the traditional IRA contribution limits.