IRA Contribution Limits for 2013
Published on January 10, 2013
A new year means new IRA contribution limits for 2013. With an increase in the contribution amount of $500, the IRS is now allowing IRA holders to contribute more than in previous years. The new contribution limits are as follows:
- The maximum amount to contribute to Roth and Traditional IRAs is the smaller of:
• $5,500 ($6,500 if you’re age 50 or older), or
• Your taxable compensation for the year.
However, there are important rules to keep in mind when making annual contributions to your IRA, one of which is contributions after age 70 ½. If you hold a Traditional IRA, you can no longer make contributions from age 70 ½ or older even though you may contribute annually to a Roth IRA regardless of age. Rollover contributions, on the other hand, may be made to both Roth and Traditional IRAs regardless of age.
Another rule to keep in mind is to avoid contributing in excess. Excess contributions are taxed at 6% per year as long as the excess remains in the IRA. The tax cannot be more than 6% of the combined value of all your IRAs as of the end of the tax year.
- An excess contribution occurs when you:
• Contribute more than the contribution limit.
• Make a regular IRA contribution to a traditional IRA at age 70 ½ or older.
• Make an improper rollover contribution to an IRA.
- You may avoid the excess contributions tax by:
• Withdrawing the excess contributions from your IRA by the due date of your individual income tax return (including extensions); and
• Withdrawing any income earned on the excess contribution.
For additional information on IRA contribution limits, tax on excess contributions, or IRS rules and regulations, please visit the IRS website.Back to Blog