Comments on: Traditional and Roth IRA Contribution Limits and Income Phase Outs

By: john agnoletti

john agnoletti — Thu, 11 Feb 2010 02:23:07 +0000

what is the thinking behind married filing separately deduction phaseout at $10,000 AGI? Seems so low compared to the other AGI thresholds.

Just wondering? Any logical reason for this?

By: Charles W.

Charles W. — Fri, 25 Sep 2009 19:42:27 +0000

My confusion is about the traditional IRA contribution. If there is no income limit except that for the purpose of taking the taxable deduction, how is the taxable value determined at the time of the withdrawl? In other words, If I have an income of $90,000, filing as single,I am allowed no deduction for a traditional IRA. If I contribute to one anyway, I have already paid tax on that money. Say it goes up 25% and I want to start taking withdrawels at age 60+. Won’t I be charged again for taxes on the original cost? If not, how is that handled?

By: Pete

Pete — Thu, 17 Sep 2009 05:33:11 +0000

Everything that the US government came up are so complicated. This is basically an insult to our intelligence and created a huge over head. I think America is digging its grave and bury herself in it very soon. The world will leave America behind.

By: Quentara

Quentara — Sat, 18 Jul 2009 11:04:24 +0000

2009 Married Filing Jointly (Spouse Covered) No Income Limit
2009 Married Filing Jointly (Spouse Not) $166,000 to $176,000

that seems backwards to me?

By: M D Franklin

M D Franklin — Thu, 29 Jan 2009 17:17:00 +0000

I file as single, head of household. For the first time in years, I have a 401k plan at work, to which I contributed minimally throughout 2008. I will be 52 soon. I have a traditional IRA. My income from all sources will be under $50K for 2008. Please confirm that I can contribute deductible IRA of $6,000 for tax year 2008. Thank you.

By: Kath

Kath — Fri, 31 Oct 2008 15:11:51 +0000

I withdrew some money from my IRA several years ago due to hardship. At that time I was not working. I was sick and I needed money to pay rent. Bank told me about possible penalty but I never got any papers about this. Would it be possible, that IRS did not penalize me or is there a fine waiting somewhere for me?

By: john

john — Fri, 26 Sep 2008 00:33:37 +0000

Hello,

I am covered by a pension and a 457 (b) plan. My W-2 #14 box is checked under Retirement. I am married and our MAGI is approx $180,000. I already contributed to a ROTH $10,000 total (wife and I) and need to change the contribution. I am under the impression that I cannot benefit from the deduction on my taxes if $10K is moved from ROTH to Traditional. Is that correct? Would it be more beneficial to up my annual contribution by the amount I would have contributed to an IRA so I can benefit from the tax benefit? Thanks for your help.

By: Raymond

Raymond — Fri, 18 Jul 2008 17:33:27 +0000

Kim,

I think you are getting two similar traditional IRA components mixed up. You are confusing “income limits pertaining to the right to contribute to an IRA account at all” to “income limits pertaining to the right to take an IRA deduction”.

There is no income restriction or cap limit to the ability to contribute to an IRA retirement account. However, there is indeed income limitations to one’s ability to take an IRA tax deduction. Higher incomes precludes one from enjoying an IRA deduction on one’s income tax return.

I made a slight change to the article wording to make it a bit more clear…thanks for your commentary!

By: kim s.

kim s. — Fri, 18 Jul 2008 17:23:20 +0000

Where did you get the Trad. IRA info? Some of it appears to be wrong regarding IRA income restrictions….

In Item #2 above, you state “While the traditional IRA is available to all with no income restrictions or contribution phaseouts, only the Roth reduces and limits your contribution if your income goes above certain levels.”

This is not true.

It is clear from the IRS website at (link) that there is certainly is an upper income limit for Trad. IRAs…

From the IRS:
Modified AGI limit for traditional IRA contributions increased. For 2008, if you are covered by a retirement plan at work, your deduction for contributions to a traditional IRA is reduced (phased out) if your modified adjusted gross income (AGI) is:

* More than $85,000 but less than $105,000 for a married couple filing a joint return or a qualifying widow(er),
* More than $53,000 but less than $63,000 for a single individual or head of household, or
* Less than $10,000 for a married individual filing a separate return.
For 2008, 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 AGI is more than $159,000 but less than $169,000. If your AGI is $169,000 or more, you cannot take a deduction for contributions to a traditional IRA.

What gives?

By: T Meyer

T Meyer — Fri, 27 Jun 2008 13:50:37 +0000

I am 58, single and have retirement income that exceeds the Traditional IRA Deductibility threshhold but is below the threshhold at which the Roth IRA contribution phaseout commences. I’m contemplating taking a parttime job and saving that income for future retirement needs. Please let me know if I am interpreting the IRA income regulatons correctly:
1. As long as my modified adjusted gross income is below $99,000, I can contribute my gross (not net) earnings (up to $6,000) from the parttime job to a Roth IRA. Once my modified adjusted gross income exceeds $114,000, I cannot contribute to a Roth IRA.
2. Regardless of my modified adjusted gross income, I could contribute up to $6000 in gross (not net) earnings from the parttime job to a Traditional IRA. I understand that this Traditional IRA contribution would not be deductible. I’m wondering what the advantage of putting that money into an Traditional IRA rather than another investment option would be. It seems to me that putting the money into an IRA would have a disadvantage – no access to the fund without penalty until I’m 59.5.

By: Raymond

Raymond — Wed, 07 May 2008 02:27:52 +0000

Aaron,

Once it’s past April 15, you can’t submit an IRA or Roth contribution for the previous tax year. The extension only applies to IRS late filing penalties.

By: Aaron

Aaron — Wed, 07 May 2008 02:24:50 +0000

Very informative site thanks. I have a question, if you are one of those people who have filed and extension for 2007 taxes can you still make a contribution for 2007 eventhough it is past April 15th 2008?

By: Raymond

Raymond — Fri, 02 May 2008 17:45:56 +0000

Oh my, yes you are correct William. Thanks for pointing out the typo!

By: William

William — Fri, 02 May 2008 15:31:48 +0000

“For example, April 15, 2007 is the contribution deadline to make a IRA or Roth contribution towards the 2007 limit. After that date, all contribution money will go towards the 2008 tax year limit.” Do you mean April 15, 2008?

By: Raymond

Raymond — Wed, 02 Apr 2008 19:17:01 +0000

Jim,

I haven’t looked into this in great detail, but I presume brokers and banks that operate Roth accounts do report contributions to the IRS.

Keep in mind that there is a 6% IRS penalty that is imposed on all excess unqualified Roth contributions until the excess is withdrawn and removed. If you had no earned income for the year, you would not be entitled to contribute and the entire amount would be regarded as excess. Thus, I would presume the IRS would keep adding up the 6% penalty charges each year until a time that the sum is large enough for them to come after you to enforce penalty payment.