IRA Contribution Limits 2021 is increased by the Internal Revenue Service. A higher contribution limit means a higher deduction if you qualify. The IRA contributions you make during the course of the year are deductible. However, you must meet the income limits for the deduction.
Learn more about the IRA contributions deduction from here.
For 2021, the IRS increased the contribution limit by $500. The $500 increase means the contribution limit is increased to $6,500. But this doesn’t mean you can’t contribute more than $6,500. If you’re age 50 or older, you get an additional $1,000 to contribute. This is known as the catch-up contribution, totaled with that, the 2021 IRA contribution limit is $7,500.
Assuming many taxpayers did not contribute much to their IRA due to the coronavirus pandemic, the $500 increase is still helpful. Especially considering there have been years where the IRA contribution wasn’t increased at all.
Although a higher IRA contribution means a higher deduction, note that only those with a traditional IRA or another qualifying plan can deduct their contributions.
Since Roth IRA contributions are made with post-tax dollars, they cannot be deducted. It certainly comes with advantages though. You get to keep more of your money if you earn more during retirement since the chances of you moving to a high tax bracket is more possible.