IRA Changes for 2013

There’s good news about IRAs for 2013. The contribution limit has increased, and more people will be able make deductible IRAs and Roth IRA contributions.

Contribution limit

Starting for the 2013 tax year, you can contribute up to $5,500 to a traditional (deductible or nondeductible) IRA or a Roth IRA. The contribution limit for 2012, including contributions for 2012 made through April 15, 2013, is $5,000.

Those who are age 50 or older can add another $1,000 as a catch-up contribution. The same catch-up contribution amount applies for both 2012 and 2013.

Increased MAGI limits

Your modified adjusted gross income (MAGI) determines whether you can contribute to a traditional IRA if you are an active participant in your employer’s plan or to Roth IRA (regardless of whether you participate in a qualified retirement plan). The following shows the phase-out ranges for making contributions for 2012 and 2013. If your MAGI is below the range, you can make a full contribution. If your MAGI falls within the range, only a partial contribution is allowed; no contribution can be made if your MAGI is over the top of the phase-out range.

MAGI phase-out ranges for IRAs for 2012 and 2013

Credit for retirement savings

Lower-income taxpayers who opt to contribute to an IRA, 401(k), or other employer plan can “double dip.” They can receive the tax breaks for the contribution (e.g., a deduction for IRA contributions and an exclusion of salary contributed to a 401(k) plan). They can also receive a tax credit based on the same contribution.

For 2013, the MAGI limits for claiming the credit increase. Thus, joint filers can claim a partial credit while having MAGI up to $59,000; the limit for heads of households is $44,250 and for single filers the limit is $29,500.