The 2020 limit for contributions to Roth and traditional IRAs is $6,000, or $7,000 if you're aged 50 or older, remaining unchanged from 2019. But there are restrictions that could affect how much you can contribute and what you can deduct on your tax return.1

KEY TAKEAWAYS

  • The 2020 combined annual contribution limit for Roth and traditional IRAs is $6,000 ($7,000 if you're age 50 or older)—unchanged from 2019.

  • Roth IRA contribution limits are reduced or eliminated at higher incomes.

  • Traditional IRA contributions are deductible, but the amount you can deduct may be reduced or eliminated if you or your spouse is covered by a retirement plan at work.

  • Lower-income taxpayers may be eligible for the "saver's credit" if they contribute to an IRA.

2020 IRA Contribution Limits

For 2020, the most you can contribute to your Roth and traditional IRAs is a total of:

  • $6,000 if you're younger than age 50

  • $7,000 if you're aged 50 or older

For the 2020 tax year, you have from Jan. 1, 2020, to April 15, 2021, to contribute to an IRA.

You Can Only Contribute "Earned Income"

You must have "earned income" to contribute to an IRA. There are two ways to get earned income: Work for someone else who pays you, or own or run a business or farm.

Earned income includes money from wages, salaries, tips, bonuses, commissions, and self-employment income.2 Also, the IRS considers disability retirement benefits as earned income until you reach the age at which you could have received a pension or annuity if you didn't have a disability.

Some types of income don't count as earned income, including:2



  • Alimony

  • Child support

  • Income from rental property

  • Interest and dividends from investments

  • Pay you received while an inmate in a penal institution

  • Retirement income

  • Social Security

  • Unemployment benefits

For 2020, you can contribute as much as $6,000 to an IRA, or $7,000 if you're aged 50 and older. But you must have enough earned income to cover the contribution.

If your earned income for the year is less than the contribution limit, you can only contribute up to your earned income. For example, if you earned $3,000, you can contribute a maximum of $3,000.


The Bottom Line

Contribution limits apply to other types of IRAs, as well. For the self-employed and small business owners, the contribution limit for Simplified Employee Pension (SEP) IRAs and solo 401(k) plans is 25% of compensation, up to $57,000.12?

If you have a Savings Incentive Match Plan (SIMPLE) IRA, you can make salary deferrals (salary reduction contributions) up to $13,500 for 2020. If you're age 50 or older, you can add an extra $3,000.13?

Any type of IRA is an excellent way to save for retirement. But to take full advantage of these accounts—and avoid any trouble or penalties—be sure to follow the rules for contribution, income, and deduction limits. The limits change periodically, so check back each year to make sure you comply.