The IRS issued a news release (IR-2014-99) that announced the 2015 cost-of-living adjustments (COLAs) for IRAs and other retirement plans. While many of these limits increased, some did not.
The IRA contribution limit for 2015 did not change from the 2014 amounts. It remains at $5,500 if you are under age 50. If you are age 50 or older in 2015, then you can contribute an additional $1,000 (known as a catch-up contribution) bringing your total to $6,500 for the year. The $1,000 catch-up contribution is not subject to a COLA adjustment.
The limit is actually $5,500 ($6,500 if you’re age 50+) or 100% of your “taxable compensation,” whichever is less. For example, let’s assume your compensation for the year is $30,000 and you’re under age 50, the most you can contribute to an IRA or Roth IRA is $5,500 (i.e., the smaller of $5,500 or $30,000). Conversely, if we assume your compensation is $3,000, then your maximum IRA contribution would be $3,000 (i.e., the smaller of $5,500 or $3,000). To make an IRA or Roth IRA contribution, you need to have taxable compensation, which is money you earn at a job. This includes your salary, tips, bonuses, or profit you earned from a self-employed business. It does not include passive income such as dividend income, interest income, capital gains, Social Security payments, or withdrawals from an IRA or company retirement plan.
This $5,500 limit is the maximum IRA contribution for the year and applies to both IRAs and Roth IRAs. It is a combined limit meaning that you can contribute to both an IRA and a Roth IRA for the same year, as long as your total contributions for the year doesn’t exceed the $5,500 (or $6,500) limit. For example, let’s assume you’re age 60; you might contribute $4,000 to your IRA and the remaining $2,500 to your Roth IRA for a total of $6,500.
Also know that to contribute to an IRA, you must be under age 70 ½ for the year. For a Roth IRA, your total income, what the IRS calls modified adjusted gross income (MAGI) must be under a certain amount to make a contribution. For example, in 2014 if you are married filing jointly, your MAGI must be under $181,000 ($183,000 in 2015) to make a full contribution to a Roth IRA or $96,000 ($98,000 in 2015) if you are single.