Dec 12

I know there are income limits on contributing to *Roth* IRA. I also know there are income limits on *writing off* a contribution to a Traditional IRA. I’m not asking either. I’m asking are there income limits on making a contribution to a Traditional IRA?

3 comments so far...

  • Judy Said on December 12th, 2009 at 4:08 pm:

    Yes there are – see the same place you found the limits for a Roth.

  • taxmannyc Said on December 12th, 2009 at 5:06 pm:

    Actually, the answer is no there is no limit. I see you already know there is an income limit on making DEDUCTIBLE contributions to traditional IRAs (which only applies by the way if your employer offers you a retirement plan during the year). Anyone can make a contribution to a traditional IRA as long as they stay within the annual contribution limits and have “earned income” (generally wages) at least equal to the contribution amount.

    These nondeductible IRA contributions grow tax-deferred until retirement. At that time, you can withdraw your original contributions tax-free (since you never received a deduction in the first place) but your earnings will be taxed when withdrawn. Your “basis” in your IRA accounts is tracked on IRS form 8606. This is very similar to the taxation of a Roth IRA, except that the earnings in a Roth account are never taxed.

  • bostonianinmo Said on December 12th, 2009 at 5:27 pm:

    The only income limit is at the bottom end, your earned income. You can contribute up to $4,000 per year ($5,000 if over 50) as long as you have at least that amount in earned income. Depending upon your income and whether or not you are covered by an employer sponsored retirement plan you may or may not be able to claim a deduction for contributions to a traditional IRA but there is no upper income limit on making contributions.

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