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Traditional IRAs

Deadline To Establish An IRA

An IRA can be established and funded at any time between January 1 of the current year, up to and including the date an individual’s income tax return is due (generally, April 15 of the following year), not including extensions.

Can Deduction Be Taken Prior To Investment Of The Funds?

Yes! This, in effect, permits an individual to file his return early in the year; e.g., January, and use his or her tax refund to make the actual contribution prior to April 15. Revenue Ruling 84-18, 1984-1 C.B. 88

Types Of Arrangements Permitted

There are currently two types of IRAs:

bulletIndividual retirement accounts: A trust with a corporate trustee.
bulletIndividual retirement annuities: This is a special annuity issued by an insurance Company

Contribution And Deduction Limits

A wage earner may contribute and deduct the lesser of $2,000 or 100% of earned income for the year. If the wage earner is married, an additional $2,000 may be contributed and deducted on behalf of a lesser earning (or nonworking) spouse, using a "spousal" IRA account. This means the family unit may contribute up to a total of $4,000 as long as family earned income is at least that amount.

Other Retirement Plans May Reduce Or Eliminate Deductions

Taxpayers who participate in an employer’s plan may make fully deductible IRA contributions only if their adjusted gross income (AGI) is below $52,000 if married  filing jointly, $32,000 if single, and $0 if married filing separately. If AGI exceeds these amounts, the $4,000 family, or $2,000 individual limit is reduced by a formula which eventually permits no deduction. No IRA deduction is allowed for married couples filing jointly with AGI over $62,000, single individuals with an AGI over $42,000, and married couples filing separately with an individual AGI over $10,000 1 . For a taxpayer who is not an active participant in an employer plan, but whose spouse is, the maximum deductible IRA contribution is phased out if their combined AGI is between $150,000 and $160,000.

1 2000 limits. For 1999 the phaseout ranges were (1) MFJ - AGI of $51,000 - $61,000; (2) Single – AGI of $31,000 -$41,000; (3) MFS – AGI of $0 - $10,000. These limits will increase annually until they reach an AGI of $80,000 -$100,000 for MFJ in 2007. For single taxpayers, the limits will increase to an AGI of $50,000 - $60,000 in 2005. The phaseout range for individuals using the MFS filing status will remain an AGI of $0 - $10,000.


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We do not offer legal advice. All information provided on this website is for informational purposes only and is not a substitute for proper legal advice. If you have legal questions, we recommend that you seek the advice of legal professionals.

Tax Disclaimer: To ensure compliance with IRS Rules, any U.S. federal tax advice provided in this communication is not intended or written to be used, and it cannot be used by the recipient or any other taxpayer (i) for the purpose of avoiding tax penalties that may be imposed on the recipient or any other taxpayer under the Internal Revenue Code, or (ii) in promoting, marketing or recommending to another party a partnership or other entity, investment plan, arrangement or other transaction addressed herein.

Copyright © 2017 Wink Tax Services / Wink Inc.
Last modified: January 30, 2017