Traditional IRA Advantages
- You may be able to deduct some or all of your contributions to a traditional IRA
- Generally, amounts in your IRA are not taxed until they are distributed
Traditional IRA Contribution and Deduction Limits
Tax Year 2011
Contribute the smaller of the following amounts:
- $5,000 ($6,000 if age 50 or older before 2012), or
- Your taxable compensation for the year
Tax Year 2012
Contribute the smaller of the following amounts:
- $5,000 ($6,000 if age 50 or older before 2013), or
- Your taxable compensation for the year
Deductions are generally the lesser of:
- The contributions to your traditional IRA for the year, or
- The general contribution limit (listed above)
Modified AGI Limit for Traditional IRA Contributions
Tax Year 2011
For 2011, if you are covered by a retirement plan at work, your deduction for contributions to a traditional IRA will be reduced (phased out) if your modified adjusted gross income (AGI) is:
- More than $90,000 but less than $110,000 for a married couple filing a joint return or a qualifying widow(er)
- More than $56,000 but less than $66,000 for a single individual or head of household, or
- Less than $10,000 for a married individual filing a separate return
If you either live with your spouse or file a joint return, and your spouse is covered by a retirement plan at work, but you are not, your deduction is phased out if your modified AGI is more than $169,000 but less than $179,000. If your modified AGI is $179,000 or more, you cannot take a deduction to contributions to a traditional IRA.
Tax Year 2012
For 2012, if you are covered by a retirement plan at work, your deduction for contributions to a traditional IRA will be reduced (phased out) if your modified adjusted gross income (AGI) is:
- More than $92,000 but less than $112,000 for a married couple filing a joint return or a qualifying widow(er)
- More than $58,000 but less than $68,000 for a single individual or head of household, or
- Less than $10,000 for a married individual filing a separate return
If you either live with your spouse or file a joint return, and your spouse is covered by a retirement plan at work, but you are not, your deduction is phased out if your modified AGI is more than $173,000 but less than $183,000. If your modified AGI is $183,000 or more, you cannot take a deduction to contributions to a traditional IRA.
Traditional IRA Distributions
- You can start taking deductions at age 59½
- You must start taking deductions at age 70½
Please consult with your tax advisor or read IRS Publication 590 for full Traditional IRA guidelines. Visit www.irs.gov to learn more.