How much can I contribute to my IRA in 2015?

How much can I contribute to my IRA in 2015?

The combined amount you can contribute to your traditional and Roth IRAs remains at $5,500 for 2015, or $6,500 if you'll be 50 or older by the end of the year. You can contribute to an IRA in addition to an employer-sponsored retirement plan like a 401(k). But if you (or your spouse) participate in an employer-sponsored plan, the amount of traditional IRA contributions you can deduct may be reduced or eliminated (phased out), depending on your modified adjusted gross income (MAGI). Your ability to make annual Roth contributions may also be phased out, depending on your MAGI. These income limits (phase-out ranges) have increased for 2015:

Income phaseout range for deductibility of traditional IRA contributions in 2015

1. Covered by an employer-sponsored plan and filing as:

Single/Head of household $61,000 - $71,000

Married filing jointly $98,000 - $118,000

Married filing separately $0 - $10,000

2. Not covered by an employer-sponsored retirement plan, but filing joint return with a spouse who is covered by a plan $183,000 - $193,000

Income phaseout range for ability to contribute to a Roth IRA in 2015

Single/Head of household $116,000 - $131,000

Married filing jointly $183,000 - $193,000

Married filing separately $0 - $10,000

Is there a new one-rollover-per-year rule for 2015?

Yes. The Internal Revenue Code says that if you receive a distribution from an IRA, you can’t make a tax-free (60-day) rollover into another IRA if you’ve already completed a tax-free rollover within the previous one-year (12-month) period. The long-standing position of the IRS was that this rule applied separately to each IRA someone owns. In 2014, however, the Tax Court held that regardless of how many IRAs he or she owns, a taxpayer may make only one nontaxable 60-day rollover within each 12-month period.

The IRS announced that it would follow the Tax Court’s decision, but that the revised rule would not apply to any rollover involving an IRA distribution that occurred before January 1, 2015. The IRS recently issued further guidance on how the revised one-rollover-per-year limit is to be applied. Most importantly, the IRS has clarified that:

All IRAs, including traditional, Roth, SEP, and SIMPLE IRAs, are aggregated and treated as one IRA when applying the new rule. For example, if you make a 60-day rollover from a Roth IRA to the same or another Roth IRA, you will be precluded from making a 60-day rollover from any other IRA–including traditional IRAs–within 12 months. The converse is also true–a 60-day rollover from a traditional IRA to the same or another traditional IRA will preclude you from making a 60-day rollover from one Roth IRA to another Roth IRA.

The exclusion for 2014 distributions is not absolute. While you can generally ignore rollovers of 2014 distributions when determining whether a 2015 rollover violates the new one-rollover-per-year limit, this special transition rule will NOT apply if the 2015 rollover is from the same IRA that either made, or received, the 2014 rollover.

In general, it’s best to avoid 60-day rollovers if possible. Use direct (trustee-to-trustee) transfers–as opposed to 60-day rollovers–between IRAs, as direct transfers aren’t subject to the one-rollover-per-year limit. The tax consequences of making a mistake can be significant–a failed rollover will be treated as a taxable distribution (with potential early-distribution penalties if you’re not yet 59½) and a potential excess contribution to the receiving IRA.

Please call me to find out more information, Jennifer Williams, President J. Williams Personal Financial Planning: 413 S. Curry St, Tehachapi, California. Office Phone 661-822-7517 Office Email: [email protected] Jennifer is a Registered Financial Consultant. She has over 20 years of experience in the industry.

Article is Courtesy of Forefiled, LLC Securities offered through NPB Financial Group, LLC. A Registered Investment Advisor/Broker-Dealer Member FINRA, MSRB, and SIPC.