Contribution Limits for 2014

Lewis RobinsonContribution Limits for 2014

Lewis Robinson (Mar 05, 2014)

The IRS announced the IRA and employer plan limits that are in effect for 2014. Please use the following as a guideline when making contributions to your IRA and/or employer plan accounts for this year, so as to ensure that you do not exceed these limits.

Traditional IRA and Roth IRA Contributions

Your IRA contribution limit remains at $5,500, plus an additional $1,000 if you are at least age 50 by the end of the year. This amount can be contributed to your Traditional IRA, Roth IRA, or split between both types of IRAs.

Reminder: Eligibility Requirements

You must meet the eligibility requirements in order (to be eligible) to make a contribution to an IRA. These include the following:

  • Eligible Compensation Requirement

You must have taxable compensation in order to be eligible to contribute to an IRA. Eligible compensation includes taxable wages, tips, other compensation reported in Box 1 of Form W-2, commissions and self-employment income. Your contribution cannot exceed the eligible compensation that you receive for the year. For example, if your eligible compensation is only $2,000, your contribution is limited to $2,000. On the other hand, if your eligible compensation is at least $5,500, you can contribute up to the maximum allowed amount of $5,500 ($6,500 if you are at least age 50 by the end of the year and your eligible compensation is at least $6,500).

  • Your Spouse’s Income Counts

If you have little or no income, but you are married and file a joint tax return with your spouse, eligible compensation received by your spouse can be used to satisfy your compensation requirement. In such cases, the compensation received by your spouse must be enough to cover contributions to your IRA, as well as any contributions made to your spouse’s IRA.

  • Age Limit on Traditional IRAs

Contributions cannot be made to your Traditional IRA beginning the year you reach age 70½. If you are age 70½ or older this year and want to make an IRA contribution, you may make it to a Roth IRA if you meet the income requirements (see below).

  • Income Limit on Roth IRA Contributions

Contributions to your Roth IRA are subject to modified adjusted gross income (MAGI) limits, based on your tax filing status. The following are the MAGI limits and corresponding allowed contribution amounts for 2014.

Tax Filing Status 2014 MAGI Allowed contribution amount for the year
Single $114,000 or less

100%

$114,000 to $129,000

Partial

$129,000 or more

None

Married filing jointly $181,000 or less

100%

$181,000 to $191,000

Partial

$191,000 or more

None

Married filing separately Less than $10,000

Partial

$10,000 or more

None

If your MAGI falls into the ‘partial’ range, a special calculation needs to be done to determine how much you are eligible to contribute.

Income Limit on Deducting Traditional IRA Contributions for Some 

If you receive contributions or benefits under a retirement plan offered by your employer, or you are married to someone who does, your eligibility to deduct contributions to your Traditional IRA is determined by your MAGI and your tax filing status. The following are the MAGI limits that apply to each tax filing status for 2014.

Tax Filing Status 2014 MAGI Allowed deduction for traditional IRA contribution
Single $60,000 or less

100%

$60,000 to $70,000

Partial

$70,000 or more

None

Married filing jointly or a qualifying widower, and active $96,000 or less

100%

$96,000 to $116,000

Partial

$116,000 or more

None

Married filing jointly. Not active, but spouse is active $181,000 or less

100%

$181,000 to $191,000

Partial

$191,000 or more

None

Married filing separately Less than $10,000

Partial

$10,000 or more

None

 

If your MAGI falls into the partial deduction range, a special calculation needs to be done to determine how much you are eligible to deduct.

Let Us Help you void Excess Contributions …

Making contributions in excess of the limits that are in effect for the year, and/or making contributions when you are ineligible- such as if you exceed the age limit for Traditional IRAs or the income limit for Roth IRAs, can result in double taxation and/or IRS assessed penalties. Steps must be taken to ensure that you meet the eligibility requirements before you make contributions. Please do not hesitate to contact us for assistance with determining eligibility and suitability for your contributions.

 

Prepared and reviewed by P. Lewis Robinson, CPA. 

This information has been prepared for informational purposes only and is general in nature.  This report is not intended as specific tax advice.  Tax laws are often complex and frequently change.  Please consult your tax advisor to discuss your specific situation before making any decisions that may have tax consequences.

CapSouth Partners is a registered Investment Advisor

About Lewis Robinson

Senior Wealth Advisor CapSouth Partners
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