If I Contributed to Ira in 2017 Can I Contribute Again in 2018

This article was updated on April 9, 2018, and originally published on October 22, 2017.

Every year, the IRS announces updated contribution limits and income thresholds for Individual Retirement Accounts, or IRAs. The IRA contribution limit is not changing in 2018, but the income limits for Roth IRA contributions and the traditional IRA tax deduction are increasing. Here's a guide to help determine your 2018 IRA contribution and deduction limitations.

The 2018 IRA contribution limit

Here's the easy part. The 2018 IRA contribution limit is $5,500, the same as it was last year. In fact, the last time the limit was increased was in 2013, when it grew by $500 to the current level.

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In addition, the catch-up contribution for savers age 50 and older remains the same, at $1,000. In other words, IRA owners who are 50 or older can contribute up to $6,500 to their IRA in 2018.

A few notes. First, the limit is per person, not per account. You can have more than one IRA -- I have a traditional IRA and a Roth IRA -- but your total contributions for 2018 cannot exceed the limit.

Second, although the limit is for 2018, there's actually a longer window in which you're allowed to make your contributions. Specifically, you have until each year's tax deadline to make your IRA contributions. For 2018, this means you can make your contributions from January 1, 2018 through April 15, 2019. Similarly, 2017 IRA contributions can be made until April 17, 2018, the day that 2017 tax returns are due.

Finally, you need to earn income in order to contribute to an IRA, which includes salaries, wages, tips, bonuses, or income from a business you operate. Things like investment income and other passive sources don't count. So technically, the IRA contribution limit is $5,500 (or $6,500), or your total earned income, whichever is less. For example, if you're in college and earn $3,000 from a part-time job in 2018, that's all you're allowed to contribute to your IRA.

The traditional IRA tax deduction: Do you qualify?

First off, everyone can contribute to a traditional IRA, up to the annual limit, regardless of income. However, the ability to take a tax deduction for your contributions may be subject to income limitations.

Here's how it works. If you aren't eligible to participate in an employer's retirement plan, and your spouse (if married) isn't either, it doesn't matter how much you earn. You can deduct your entire traditional IRA contribution.

On the other hand, if you or your spouse participates in an employer's retirement plan, such as a 401(k) or pension plan, your ability to take a deduction is income-restricted.

If you participate in an employer's plan, here are the adjusted gross income (AGI) limitations for the traditional IRA deduction in 2018:

Tax Filing Status	2018 Traditional IRA Full Deduction AGI Limit	Phase-Out Limit
Single or Head of Household	$63,000	$73,000
Married Filing Jointly	$101,000	$121,000
Married Filing Separately	$0	$10,000

Data Source: IRS.

Here's how to interpret this chart. For your tax-filing status, if your AGI is less than the full deduction limit, you can deduct your full traditional IRA contribution for the 2018 tax year. If your AGI falls between the two limits, you can take a partial deduction. And if your AGI exceeds the phase-out limit for your tax-filing status, you cannot take a traditional IRA deduction for 2018.

If you don't participate in an employer's plan, your traditional IRA deduction is limited only if your spouse participates in their employer's retirement plan. In this case, the income limits are:

Tax Filing Status	2018 Traditional IRA Full Deduction AGI Limit	Phase-Out Limit
Married Filing Jointly (spouse has an employer's plan)	$189,000	$199,000
Married Filing Separately	$0	$10,000

Data Source: IRS.

Finally, it's also worth mentioning that the traditional IRA tax deduction is an above-the-line deduction, meaning that you can take it even if you don't itemize.

The Roth income limits, and how to get around them

Unlike traditional IRAs, Roth eligibility has nothing to do with whether you participate in an employer's retirement plan or not. Instead, there's one set of income limits that applies to everyone.

Here's a chart of the 2018 Roth IRA income limits. For your tax-filing status, if your AGI is less than the full contribution limit, you can contribute up to $5,500 or $6,500, depending on your age, to a Roth IRA for the 2018 tax year. If your AGI falls between the two limits, you can make a partial contribution. And if your AGI exceeds the phase-out limit for your tax-filing status, you cannot contribute directly to a Roth IRA for 2018.

Tax Filing Status	2018 Roth IRA Full Contribution AGI Limit	Phase-Out Limit
Single or Head of Household	$120,000	$135,000
Married Filing Jointly	$189,000	$199,000
Married Filing Separately	$0	$10,000

Data Source: IRS.

It's worth mentioning that even if you exceed the phase-out AGI limit, there's a way to get around it. Known as the backdoor method, there's an IRS rule that essentially says you can contribute to a traditional IRA and immediately recharacterize the account as a Roth IRA, regardless of your income.

Why contribute to an IRA in 2018 (and every year after)?

I've written before that saving for retirement in a tax-advantaged account like an IRA is the single smartest tax move that most Americans can make. Not only can your IRA contributions get you a nice tax break -- either now or in the future -- but tax-deferred compounding can turn your $5,500 annual contributions into quite a nest egg.

Consider this. Based on a historically conservative 7% annualized rate of return, a $5,500 IRA contribution every year for 30 years ($165,000 total) could grow into a nearly $520,000 nest egg. That can have a serious impact on your qualify of life after retirement, and the earlier you start, the bigger the effect will be.

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Source: https://www.fool.com/retirement/2017/10/22/heres-the-2018-ira-contribution-limit.aspx

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