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IRA Tax Rules
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In June 2001, Congress enacted into law several changes. Here is a listing of some of the changes that took effect in the 2002 tax year. |
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Traditional IRA Increased
This IRA allows a federal tax deductible deposit of up to $4,000 for those who qualify. The earnings are tax-deferred until time of withdrawal. |
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How much can I contribute?
Starting in taxable years after December 31, 2001, the amount qualified IRA owners are permitted to contribute annually to their IRAs will be gradually increased to $5,000. Additional catch-up contributions can be made by qualified individuals over fifty. After 2008, the contribution limit will be adjusted annually for inflation in $500 increments.
You are permitted to annually contribute the following maximum amounts or 100% of your earned compensation and alimony; whichever is less:
New Traditional & Roth IRA
Maximum Contributions Limits |
Year |
Under Age 50 |
Over Age 50 |
2002 |
$3,000 |
$3,500 |
2003 |
$3,000 |
$3,500 |
2004 |
$3,000 |
$3,500 |
2005 |
$4,000 |
$4,500 |
2006 |
$4,000 |
$5,000 |
2007 |
$4,000 |
$5,000 |
2008 |
$5,000 |
$6,000 |
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New Traditional and Roth Spousal Rules
Spousal IRA rules enable married couples filing jointly to contribute the maximum amount to their separate IRA accounts even if one spouse has little or no earned income. To qualify, their combined earned income must be equal to or greater than the total contributed amount.
With a Roth IRA, unlike a traditional IRA, you can continue to make contributions even after you have reached age 70 1/2, provided you have earned income.
Federal Income Tax Filing Status |
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Year |
Full Deduction if MAGI is at or Below |
Partial Deduction if MAGI is more than/but less than |
No Deduction if MAGI is at or above |
| Single, Active Participant |
2005
and
later |
$50,000 |
$50,000/$60,000 |
$60,000 |
| Married Filing Jointly, Active Participant |
2005
2006
2007 and later |
$70,000
$75,000
$80,000 |
$70,000/$80,000
$75,000/$85,000
$80,000/$100,000
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$80,000
$85,000
$100,000 |
| Married Filing Jointly, Not Active Participant, but Spouse Is |
2005 and later |
$150,000 |
$150,000/$160,000 |
$160,000 |
| Married Filing Separately, Filer or Spouse Active Participant |
2005 and later |
$0 |
$0/$10,000 |
$10,000 |
Furthermore, an individual who does not participate in an employer plan, yet their spouse does, may deduct their regular IRA contributions provided their combined adjusted gross income level is below $150,000. They will be allowed a smaller maximum deduction if their combined adjusted gross income is greater than $150,000 provided it is not over $160,000.
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How much is deductible from my taxes?
For those not covered by an employer sponsored retirement plan, you will receive a full deduction regardless of your income. If you participate in an employer sponsored retirement plan, your income and filing status determines the amount that your contribution is deductible from taxes. The above chart illustrates the increasing maximum income levels for single filers and couples filing jointly to deduct all or part of their IRA contributions.
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Need More Information?
Contact your local branch for details click here
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