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Contribution Limits

Traditional and Roth IRAs

2017 Limits:

$5,500 if you were born after 1967
$6,500 if you were born in 1967 or earlier (age 50 or older)

2018 Limits:

$5,500 if you were born after 1968
$6,500 if you were born in 1968 or earlier (age 50 or older)

Income Requirements:

The amount you may contribute to a Traditional or Roth IRA is limited to your earned income. Pension and Social Security benefit payments are not considered earned income.

Modified Adjusted Income Limits for Roth IRAs:

The amount you may contribute to a Roth IRA is affected by your  modified adjusted income and your income tax filing status. See the IRS website for more information: 2017 Roth IRA Contribution Limits  and 2018 Roth IRA Contribution Limits.

Combined Plan Limits

These limits reflect the total amount allowed (not per account) for all a person’s Roth and Traditional IRAs. If you have already contributed the limit to a traditional account you cannot also contribute the limit to a Roth IRA.

Deductibility

Contributions to Traditional IRA may be fully deductible, partially deductible, or nondeductible, depending on whether you or your spouse are covered by a retirement plan at work. Contributions to a Roth IRA are not tax-deductible and the you will need to verify eligibility based on modified adjusted gross income.

SEPs

Employer contributions:

2017 LIMITS: The lesser of 25% of the employee’s compensation or $54,000.
2018 LIMITS: The lesser of 25% of the employee’s compensation or $55,000.

Remember, SEP contributions are employer contributions, so the contribution must be made by the business that adopted the SEP plan.

To illustrate, assume that Jane is the only shareholder (owner) and only employee of Jane’s Enterprises, Inc. While preparing Jane’s 2017 business and personal tax returns, her CPA advised her to set up a retirement plan. Jane’s Enterprises, Inc. adopted a SEP and will make a contribution of $45,000 for 2017 to Jane’s traditional IRA with Custodian C. Jane writes a check from the Jane’s Enterprises, Inc. checking account (i.e., a company check) for $45,000 payable to Custodian C fbo Jane’s IRA and sends it to Custodian C. The SEP contribution cannot be made from Jane’s personal checking account.

The structure of the business does not matter. For example, assume that Jane had set up her business as a Limited Liability Company rather than a corporation. In that case, Jane would be the only member (owner) and “employee” of the business, Jane’s Enterprises, LLC. Jane would write a check from the Jane’s Enterprises, LLC checking account (i.e., a company check) for $45,000 payable to Custodian C fbo Jane’s IRA and send it to Custodian C. The SEP contribution would not be made from Jane’s personal checking account.

Employee (SEP-IRA account owner) contributions:

The owner of a SEP-IRA may also make personal contributions to the SEP IRA, subject to the limits for Traditional IRAs and Roth IRAs. These funds should come from their personal account, not the company.

For example, assume that Jane is age 51 and contributed $3,000 to her Roth IRA for 2017. She may contribute up to $3,500 to her SEP-IRA from her personal funds.

SIMPLEs

2017 Limits for employee contributions (deferrals):

$12,500 if you were born after 1967
$14,500 if you were born in 1967 or earlier (age 50 or older)

2018 Limits for employee contributions (deferrals):

$12,500 if you were born after 1968
$15,500 if you were born in 1968 or earlier (age 50 or older)

Employer contributions:

All contributions to a SIMPLE-IRA are made by the employer. The contributions are made up of employee salary reduction contributions and employer contributions. The employer must make either matching contributions for employees who contribute or nonelective contributions for all employees, whether they contribute or not.

The account owner cannot make additional contributions to a SIMPLE-IRA.