IRA contribution and deduction rules for 2014

Using individual retirement arrangements (IRA) is a very good way to save for your retirement. However, there are limits on how much you can contribute each year. There are also other factors that will affect the amount you can deduct on your traditional IRA contributions.  Roth IRA contributions, however, are not deductible.

Contribution limit for 2014:
Contributions to a traditional or Roth IRA may be the smaller of: 

• $5,500 for people under 50 ($6,500 if you are age 50 or older), or 
• your taxable compensation (your earned income) for the year. 

This is the total amount that you can contribute for 2014 regardless of whether the contributions are:

• to one or more of your traditional or Roth IRAs, or
• non-deductible, wholly or partly.

There are some factors which may limit or eliminate your ability to contribute to an IRA. For example:

• you can’t contribute to a traditional IRA for the year when you turn 70½, but you may still be able to contribute to a Roth IRA (there is no age limit for Roth); and 
• your contribution to a Roth IRA is reduced or even eliminated when your modified adjusted gross income reaches certain levels depending on your filing status,

The IRA contribution limit, however, does not apply to rollover contributions. 

Deduction limit 
The amount of traditional IRA contributions that you can deduct from your taxable income depends on the following two factors:

• whether you or your spouse were covered by an employer-sponsored retirement plan at work,
• if  your income is above certain thresholds.

Again, Roth IRA contributions are not tax deductible. 

If you are interested to learn more about IRA contribution and deduction limits and rules, please review Publication 590 - Individual Retirement Arrangements (IRAs) which provides a comprehensive description of the IRA rules, including contribution and deduction rules and deadlines.

If you have any questions, please feel free to email us.

Your comments and feedback are welcome.
Source:  www.irs.gov.

Email:   Excellent-tax@gmx.com