2019 IRA contributions can be made until the tax filing deadline of April 15, 2020. Good news, the contribution limit increased in 2019 by $500 to $6000. Those age 50 and older can contribute an additional “catch-up” contribution of $1000 for a total of $7000.

Even if you participate in a retirement plan at work, making an IRA contribution has its benefits. Traditional IRA contributions can be tax deductible. That means your taxable income will be reduced dollar-for-dollar of your contribution up to the annual maximum. However, there are income limits that could reduce or eliminate that benefit.

Deduction benefits are phased out for singles and heads of household covered by a workplace retirement plan and have modified adjusted gross incomes (AGI) between $64,000 and $74,000. For married couples filing jointly, in which the spouse who makes the IRA contribution is covered by a workplace retirement plan, the income phase-out range is $103,000 to $123,000.

If you are not covered by a retirement plan at work and married to someone who is covered, the deduction is phased out if the couple’s income is between $193,000 and $203,000 in 2019. If neither you nor your spouse is covered by a retirement plan, the income limits for deductibility don’t apply.

Tax payers with earned income over the phase out limits can make a traditional IRA contribution, but it would not be deductible. These situations can be complex in the future when withdrawals are made. Whether the contribution is deductible or not should be tracked and coordinated with a CPA.

Roth IRAs share the same contribution limits in 2019, but the income limitations are different. Unlike the traditional IRA, if your income exceeds the limits, no contribution can be made. The AGI phase-out range for making contributions to a Roth IRA is $193,000 to $203,000 for married couples filing jointly. For singles and heads of household, the income phase-out range is $122,000 to $137,000.

If you earn too much to open a Roth IRA, you can open a nondeductible IRA and convert it to a Roth IRA since income restrictions for Roth IRA conversions was lifted by Congress. This can also be a complex situation and one that should be coordinated with your CPA.

Contact us to learn more about 2019 IRA contributions. Deciding whether to make a contribution, and whether to a traditional IRA or Roth IRA should be made in light of your specific situation. Kemper employs CPA, CFP® and CFA professionals ready to assist with your financial needs.