Deductible IRAs
Phase-out income levels for deductibility through 2007 and beyond.
You can make an annual deductible contribution to an IRA if:
You (and your spouse) are not an active participant in an employer-sponsored retirement plan, or
You (or your spouse) are an active participant in an employer plan, and your modified adjusted gross income (AGI) doesn't exceed certain levels that vary from year-to-year by filing status (see chart, below, for details).
Example:If you are a joint return filer covered by an employer plan, your deductible IRA contribution phases out over $53,000 to $63,000 of modified AGI ($54,000 to $64,000 for 2002).
If you're single or a head of household, the phaseout range is $33,000 to $43,000 ($34,000 to $44,000 for 2002).
For a married filing separately, the phaseout range is $0 to $10,000 (for all years).
If you are not an active participant in an employer-sponsored retirement plan but your spouse is, your deductible IRA contribution phases out over $150,0000 to $160,000 of modified AGI.
Deductible IRA contributions reduce your current tax bill, and earnings within the IRA are tax-deferred. However, every dollar you take out is taxed in full (and subject to a 10% penalty if you withdraw money before age 59-1/2 unless one of several exceptions apply).
You must begin making minimum withdrawals by April 1 of the year following the year you attain age 70-1/2.
CHART BELOW:
Joint Return Filers
Single or Head of Household
Married Filing Separately
Non-Active Participant with Active-Participant Spouse
Also:
Spouses who file separate returns and live apart at all times during the year aren't treated as married for purposes of the IRA deduction phase-out.
Compensation means wages, salaries, commissions, tips, bonuses, professional fees and other amounts received for personal services. It doesn't include earnings from property, such as interest, rents and dividends, or pension and annuity payments or other deferred compensation. Only compensation includible in gross income is used.
Compensation includes taxable alimony paid under a decree of divorce or separate maintenance. It also includes earned income exempt from self-employment tax because the individual is a member of a religious faith opposed to social security benefits.
The compensation of a self-employed individual includes net earnings from self-employment reduced by any allowable deduction for contributions on his behalf to a tax-qualified plan, e.g., a Keogh plan. A self-employed individual's net earnings from self-employment are also reduced by the deduction allowed for one-half of the self-employment tax.
No deduction is allowed for contributions for the benefit of an individual for the tax year he attains age 70 1/2 or any later year.
The IRA must be established no later than the due date (not including extensions) of the taxpayer's income tax return for the year the deduction is claimed. To be deductible for the preceding tax year, the contribution also must be made by that date.
No deduction is permitted for a rollover contribution or for any contribution to an "inherited" IRA--one acquired by other than the surviving spouse as a result of the death of the employee-participant___
From RIA (https://www.RIAhome.com)
You (and your spouse) are not an active participant in an employer-sponsored retirement plan, or
You (or your spouse) are an active participant in an employer plan, and your modified adjusted gross income (AGI) doesn't exceed certain levels that vary from year-to-year by filing status (see chart, below, for details).
Example:If you are a joint return filer covered by an employer plan, your deductible IRA contribution phases out over $53,000 to $63,000 of modified AGI ($54,000 to $64,000 for 2002).
If you're single or a head of household, the phaseout range is $33,000 to $43,000 ($34,000 to $44,000 for 2002).
For a married filing separately, the phaseout range is $0 to $10,000 (for all years).
If you are not an active participant in an employer-sponsored retirement plan but your spouse is, your deductible IRA contribution phases out over $150,0000 to $160,000 of modified AGI.
Deductible IRA contributions reduce your current tax bill, and earnings within the IRA are tax-deferred. However, every dollar you take out is taxed in full (and subject to a 10% penalty if you withdraw money before age 59-1/2 unless one of several exceptions apply).
You must begin making minimum withdrawals by April 1 of the year following the year you attain age 70-1/2.
CHART BELOW:
Joint Return Filers
| Tax years beginning in: | IRA deduction phase-out begins at AGI of: | IRA deduction eliminated if AGI is: |
| 2001 | $53,000 | $63,000 or more |
| 2002 | $54,000 | $64,000 or more |
| 2003 | $60,000 | $70,000 or more |
| 2004 | $65,000 | $75,000 or more |
| 2005 | $70,000 | $80,000 or more |
| 2006 | $75,000 | $85,000 or more |
| 2007 and thereafter | $80,000 | $100,000 or more |
Single or Head of Household
| Tax years beginning in: | IRA deduction phase-out begins at AGI of: | IRA deduction eliminated if AGI is: |
| 2001 | $33,000 | $43,000 or more |
| 2002 | $34,000 | $44,000 or more |
| 2003 | $40,000 | $50,000 or more |
| 2004 | $45,000 | $55,000 or more |
| 2005 and thereafter | $50,000 | $60,000 or more |
Married Filing Separately
| Any tax year | IRA deduction phase-out begins at $0 AGI | IRA deduction eliminated if AGI is $10,000 or more |
Non-Active Participant with Active-Participant Spouse
| Any tax year | IRA deduction phase-outbegins at $150,000 AGI | IRA deduction eliminated if AGI is $160,000 or more |
Also:
Spouses who file separate returns and live apart at all times during the year aren't treated as married for purposes of the IRA deduction phase-out.
Compensation means wages, salaries, commissions, tips, bonuses, professional fees and other amounts received for personal services. It doesn't include earnings from property, such as interest, rents and dividends, or pension and annuity payments or other deferred compensation. Only compensation includible in gross income is used.
Compensation includes taxable alimony paid under a decree of divorce or separate maintenance. It also includes earned income exempt from self-employment tax because the individual is a member of a religious faith opposed to social security benefits.
The compensation of a self-employed individual includes net earnings from self-employment reduced by any allowable deduction for contributions on his behalf to a tax-qualified plan, e.g., a Keogh plan. A self-employed individual's net earnings from self-employment are also reduced by the deduction allowed for one-half of the self-employment tax.
No deduction is allowed for contributions for the benefit of an individual for the tax year he attains age 70 1/2 or any later year.
The IRA must be established no later than the due date (not including extensions) of the taxpayer's income tax return for the year the deduction is claimed. To be deductible for the preceding tax year, the contribution also must be made by that date.
No deduction is permitted for a rollover contribution or for any contribution to an "inherited" IRA--one acquired by other than the surviving spouse as a result of the death of the employee-participant
From RIA (https://www.RIAhome.com)
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