IRA Contribution Limits for 2011, 2012

Are you a good saver? Has your business become much more profitable in the last few years? Are you hoping to put some money away for the future and retirement?

Nearly every taxpayer knows about IRAs. They are typically the small savers and self-employed person’s means of building their nest egg. So how much are you able to put into an IRA each year? What are the IRA contribution limits? What if you add more than the contribution limit? Where can I find an IRA calculator?

Here are the IRA contribution limits for 2011 and 2012:

If you are 50 years old or younger by December 31, 2011;

If you are under 50 years of age at the end of 2011, the maximum contribution that you can make to a traditional or Roth IRA is the lesser of $5,000 or the amount of your taxable compensation for 2011. You can split this limit between a traditional IRA and a Roth IRA. The combined limit is still set at $5,000 if you decide to split them. The IRA contribution limits are the same as they were in the year 2010.

If you are 50 years or older by December 31, 2011;

If you are 50 years of age or older at the end of 2011, the maximum contribution that you can make to a traditional or Roth IRA is the lesser of $6,000 or the amount of your taxable compensation for 2011. The maximum contribution to a Roth IRA and the maximum deductible contribution to a traditional IRA may be lowered depending on your modified adjusted gross income. The IRA contribution limits are the same for 2011 in this category also.

Roth IRA contribution limits parallel those for traditional IRAs in every tax year. In other words, the limits are the same for a Roth as those described above. This is true even though the contributions themselves are not exempt from tax as is the case with a traditional IRA.

The IRAs were created to encourage people to save money for their retirement and the advantage was a significant tax break in addition to having some money set aside. Contributing to an IRA is an important part of tax planning and preparing for your financial security as you age and go into your retirement.

To use a free IRA calculator visit TurboTax calculator. See how much can you contribute to an IRA and what the tax impact is.

Don’t delay, good planning will help you minimize the tax bite and do what is best for you!