One of the immediate benefits of contributing to a Traditional IRA is a tax deduction you can receive on your income taxes. For tax year ending December 31, 2023, you may receive a 100% deduction on your annual contribution if:
For the tax year ending December 31, 2024, you may receive a 100% deduction on your annual contribution if:
If you participate in an employer plan, IRA deductibility is gradually phased out above these income levels.
If you reach the age of 50 before the end of the taxable year, you may be eligible to contribute an additional catch-up contribution to your Traditional and/or Roth IRA. For tax year 2006 and beyond, the annual amount is $1,000.
The deadline to contribute to a Traditional IRA for a particular tax year is generally April 15 (or tax day) of the following year. When this date occurs on a weekend or a legal holiday, the following business day becomes the deadline.
When you contribute to your IRA between January 1 and April 15 (or Tax Day) for the previous tax year, it’s referred to as a “carryback” or “prior year” contribution.
For tax year ending December 31, 2023, the deadline to contribute a carryback contribution is Tax Day, April 15, 2024.
A SEP is a type of retirement plan that allows an employer to contribute to employees’ Traditional IRAs. SEP contributions are subject to different contribution limits than Traditional IRA contributions. Once the employer makes a SEP plan contribution to an IRA, the contribution becomes an IRA asset and is subject to all the regular IRA rules and regulations. There are several other benefits of SEP plans:
Yes! A non-deductible contribution gets you one step closer to a secure retirement. It grows tax-deferred and is tax-sheltered until you withdraw it.
You should file a 8606 form to track your non-deductible contributions.
You may receive a non-refundable tax credit (not to exceed $1,000) for contributions made to Traditional and Roth IRAs. If you are eligible, the tax credit equals the applicable percentage on up to $2,000 of a “qualified retirement savings contribution” which includes annual Traditional and Roth IRA contributions. Eligibility requirements include:
See the chart below for eligible income levels and the applicable percentage used to calculate the tax credit:
| Joint Return | Head of Household | All Other Cases | Applicable percentage | |||
| Over | Not over | Over | Not over | Over | Not over | |
| $0 | $37,000 | $0 | $27,750 | $0 | $18,500 | 50% |
| $37001 | $40,000 | $27,751 | $30,000 | $18,501 | $20,000 | 20% |
| $40,001 | $62,000 | $30,001 | $46,500 | $20,001 | $31,000 | 10% |
| $62,000 | $46,500 | $31,000 | 0% | |||
Please consult a tax professional if you have further questions.
You can contribute if you have earned income from employment equal to or greater than your IRA contribution.
For tax year 2024, the contribution limit is $7,000 and, if you are age 50 or above, you could also make an additional $1,000 catch-up contribution for a combined total of $8,000 annually.
Unlike most employer retirement plans in which access to funds is limited to such events as change of employment, plan termination, reaching retirement age, death, or disability, access to your IRA funds is guaranteed, always. However, until age 59 1/2 there is a 10 percent early distribution penalty and you may be taxed on the amount withdrawn unless you qualify for an exemption due to one of the following reasons:
You can move your IRA from one financial organization to another provided that your IRA assets are:
Note: The IRS permits one rollover deposit in a 12-month period for all IRA accounts. This limitation doesn’t apply to Roth conversions or institution transfers
Starting January 1, 2023, the Required Beginning age to take a Required Minimum Distribution (RMD) increased to 73 years old for IRA owners who will turn 73 in 2023. RMDs are generally based on your IRA balance divided by your life expectancy, either singly or jointly with your IRA beneficiary. IRAs are meant to provide for retirement, so if you don’t take your required distributions, you’ll be subject to a substantial penalty.
Contributions made by an employer through a retirement plan known as a simplified employee pension (SEP) are actually contributed to a Traditional IRA, and they can be combined with regular IRA contributions. Effective in 2002, after-tax assets from a “qualified retirement plan” and assets held in governmental 457 plans are eligible for rollover to a Traditional IRA. To protect the option of someday moving them to another employer plan, such assets are often best kept in a separate IRA that contains no other contributions.
Single tax filers may contribute up to the maximum allowable per year if their modified adjusted gross income (MAGI) is less than $146,000. If a single tax filer’s MAGI is between $146,000 and $161,000, they may contribute a reduced amount adjusted for their income. Married couples filing jointly may each contribute up to the maximum allowable if their MAGI is less than $230,000. Contributions for joint filers are reduced for MAGI between $230,000 and $240,000.
Roth IRA contributions may not be made by single tax filer’s with MAGI of more than $161,000 or couples with MAGI of more than $240,000.
For tax year 2024, the contribution limit is $7,000 and, if you are age 50 or above, you could also make an additional $1,000 catch-up contribution for a combined total of $8,000 annually.
You may make tax-free and penalty-free withdrawals from your Roth IRA if you satisfy two conditions. First, your Roth IRA must have been open for a minimum of five years. Second, the withdrawal must be made because of the occurrence of one of the following events:
Distributions that meet the above requirements are referred to as “qualified distributions.” While you may take distributions from your Roth IRA at any time, distributions which are not qualified distributions may be subject to taxes (and in some cases early distribution penalties) to the extent they exceed your aggregate contributions to Roth IRAs.
If you reach the age of 50 before the end of the taxable year, you may be eligible to contribute an additional catch-up contribution to your Traditional and/or Roth IRA. For tax year 2006 and beyond, the annual amount is $1,000.
The deadline to contribute to a Roth IRA for a particular tax year is generally April 15 (or tax day) of the following year. When this date occurs on a weekend or a legal holiday, the following business day becomes the deadline. Tax return extensions will not affect this deadline.
When you contribute to your IRA between January 1 and April 15 (or Tax Day) for the previous tax year, it’s referred to as a “carryback” or “prior year” contribution.
For tax year ending December 31, 2023, the deadline to contribute a carryback contribution is Tax Day, April 15, 2024.
The money you contribute to a Roth IRA has already been taxed. As long as you stay within the contribution guidelines, the principal amount is never subject to future taxes or penalties.
Roth IRA contributions grow tax deferred. If you do not withdraw any of the earnings until you have had the Roth IRA for at least five (5) years and have a qualifying event, those tax-deferred earnings become tax-free.
Unlike the Traditional IRA, there are no required minimum distributions at age 73. Your earnings can continue to grow until you need them. There are special requirements when these plans pass to your beneficiaries.
Yes. You may convert assets from a Traditional IRA to a Roth IRA. You must pay tax on any previously untaxed dollars converted from the Traditional IRA to the Roth IRA, but the 10 percent early distribution penalty doesn’t apply to the conversion amount. You should seek advice from a tax professional to determine whether converting pretax retirement assets is beneficial.
