Tax-deferred growth
In a traditional IRA, investments grow free of federal income taxes until money is withdrawn, and if qualified, contributions may be deducted. Eventually, federal income tax on investment earnings and any IRA contributions that have been deducted must be paid.
Contribution eligibility
Contributions to a traditional IRA can be made if the contributor is younger than age 70½ and has earned income. Even if the contributor is older than 70½, he or she may contribute to a nonworking spouse's IRA if the spouse has not reached 70½. The total contribution cannot exceed income earned in the year of the contribution.
Contribution limits and deductibility
Each annual contribution amount from taxable income potentially may be deducted. The ability to deduct depends upon adjusted gross income (AGI), marital status and whether the contributor (or a spouse, if married) is covered by a retirement plan at work. Deductibility limits can be confusing so it is always wise to review specific situations with a tax advisor.
Check the table below to find your maximum federal contribution level:
| Age as of the end of the tax year |
2008 |
| Individuals younger than 50 |
$4,000 |
| Individuals aged 50 and older |
$5,000 |
| Married, both younger than 50 |
$8,000 |
| Married, both aged 50 or older |
$10,000 |
| Or 100% or your taxable income |
Source: www.irs.gov
Contribution deadline Contributions can be made to an IRA for a specific tax year anytime during the year or up until the tax-filing deadline, usually April 15 of the following year. Even if a tax-filing extension is obtained, the deadline for making IRA contributions cannot e extended. The IRA contribution deadline may vary for residents of states that acknowledge Patriot's Day.
NOTE: Please consult your tax professional regarding your specific needs.