Other Retirement Plan
If you are covered by a retirement plan like a 401k or 403b, you
need to be aware of the income limitations for traditional IRA accounts.
Single taxpayers covered by such plans can only take a full deduction
for a traditional IRA if their adjusted gross income is $56,000 or less.
Those taxpayers can get a partial deduction if their income falls
between $56,001 and $66,000. The deduction phases out completely at
$66,000.
As of 2011, married taxpayers who are covered by retirement plans at work can take the full deduction if their adjusted gross income is $90,000 or less. Married couples can take a partial deduction if their combined income falls between $90,001 and $110,000. Once their income rises above the $110,000 threshold, however, they can no longer take a deduction. Always check the IRS website for up-to-date income limitations before making an IRA contribution.
As of 2011, married taxpayers who are covered by retirement plans at work can take the full deduction if their adjusted gross income is $90,000 or less. Married couples can take a partial deduction if their combined income falls between $90,001 and $110,000. Once their income rises above the $110,000 threshold, however, they can no longer take a deduction. Always check the IRS website for up-to-date income limitations before making an IRA contribution.
No Retirement Plan
If you are a single taxpayer who is not covered by a retirement
plan at work, you need not worry about income limits. As of 2011, you
can take the full deduction for a traditional IRA regardless of your
income level if you're not covered by a retirement plan. That means you
can contribute up to $5,000 to a traditional IRA and deduct the amount
you contribute from your taxes. If you are 50 years of age or older, you
can contribute an extra $1,000, for a total of $6,000.
Married couples do face some restrictions when contributing to a traditional IRA, however. There is no income restriction if neither spouse is covered by a retirement plan, but if one spouse has access to a plan the income limit for full deductibility is $169,000 in adjusted gross income. A partial deduction is available to those who make between $169,001 and $179,000, and the deduction phases out completely above that income level.
Married couples do face some restrictions when contributing to a traditional IRA, however. There is no income restriction if neither spouse is covered by a retirement plan, but if one spouse has access to a plan the income limit for full deductibility is $169,000 in adjusted gross income. A partial deduction is available to those who make between $169,001 and $179,000, and the deduction phases out completely above that income level.
Tax Planning
If you are close to the income limits for a traditional IRA, it
is a good idea to do some tax planning ahead of time before you make
your contribution. If you think you might no longer be eligible, it
makes sense to wait until the final income numbers are in before you
make your IRA contribution for the year. If you are used to making your
IRA contribution in monthly installments, you can make that money
contribution to a money market fund instead. Once you know whether or
not you are eligible, you can put that money in your traditional IRA or
into another retirement fund if you are no longer eligible for the IRA.
Roth IRA
If you are not eligible for a traditional IRA deduction, consider
contributing to a Roth IRA. The Roth IRA does not provide up front
deductibility the way a traditional IRA does, but it provides the
advantage of tax-free withdrawals during retirement.
0 comments:
Post a Comment