Traditional IRAs

Definition

A traditional individual retirement account or individual retirement annuity (IRA) is a personal savings plan that offers tax benefits to encourage retirement savings. You can contribute up to the lesser of $6,000 in 2019 (up from $5,500 in 2018), or 100% of your taxable compensation to a traditional IRA. In addition, individuals age 50 and older can make an extra "catch-up" contribution of $1,000 in 2018 and 2019. Funds in a traditional IRA grow tax deferred until they are withdrawn. Contributions may be fully or partially tax deductible, depending on certain factors.

Prerequisites

  • You have not reached age 70½ during the year of the contribution

  • You have taxable compensation (i.e., wages, self-employment income) during the year

  • You can deduct the full amount of your contribution provided that you are not covered by an employer-sponsored retirement plan

  • If you are covered by an employer-sponsored retirement plan, your IRA deduction (if any) depends on your modified adjusted gross income (MAGI) and your federal income tax filing status. You will be entitled to a partial deduction in 2019 if your MAGI is less than:

  1. $74,000 if your filing status is single or head of household (less than or equal to $64,000 for a full deduction)

  2. $123,000 if your filing status is married filing jointly (less than or equal to $103,000 for a full deduction)

  3. $10,000 if your filing status is married filing separately (full deduction not available)

Complete Article


How Can We Help You?

Name *
Name
Phone
Phone