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Looking For Another Income Tax Deduction? You Might Qualify For An Ira And Not Know It By Robert D. Cavanaugh, CLU 2007-02-13 An additional income tax deduction may be available by contributing to an IRA. However, many people may not realize they qualify to have an IRA. So let’s take a look at the contribution rules.
One of the things that makes IRAs so complicated is trying to understand the eligibility, maximum contribution limits, contribution phaseouts, etc. of all the types of IRAs at one time. Technically, there are five types of IRAs: Traditional, Roth, SEPs, SAR-SEPs and SIMPLE. So we are going to limit the discussion here to the traditional IRA.
In this article, all of the rules pertain to 2007. Some of the numbers used in the calculation of how much you can contribute to an IRA are subject to indexing. So you need to obtain the proper figures for any year in question.
The determination of your eligibility for a traditional IRA, and the ability to calculate how much you could contribute, are dependent on several things:
1. Your age
If you are under 50, you can contribute a maximum of $4,000 to a traditional IRA. If you turn 50 during the year or are over 50, you can add another $1,000 which is called a “catch-up” contribution. If you turn 70 ½ during the year, you can't make any contribution.
2. Were you an active participant in an employer sponsored plan during the year?
If so, you still may be able to contribute to an IRA. The amount depends on how much money you made and your tax filing status (single, joint or separate).
Having “modified adjusted gross income” (MAGI) of certain levels requires applying a formula which calculates a gradually decreasing permissible deductible contribution. If your MAGI exceeds certain thresholds, you can't contribute anything. These thresholds depend on how you file your taxes. Here they are:
Married filing jointly: Up to $83,000 of MAGI allows for a full contribution. Then a phrase out begins as income increases. For MAGI of $103,000 or above, no deductible contribution is allowed.
Single or Head of Household: If your MAGI is $62,000 or above, no deductible contribution is possible. The phase out starts at $52,000,
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<P><FONT face=Verdana,Geneva,Arial,Helvetica,Sans-Serif><STRONG>Wi-Fi around Chicago..</STRONG></FONT></P>
<P><FONT face=Verdana,Geneva,Arial,Helvetica,Sans-Serif><FONT size=2>The Daley Center between Clark and Dearborn is now (as of September 2003) a wi-fi hot zone. I have not personally connected there, but the word is </FONT><FONT size=2>that the signal around Daley Plaza and Block 37 is strong. Click <A href="http://www.xchicago.com/main/article.php?articleID=413">here</A> for more information. </FONT></FONT></P>
<P><FONT size=2>If you are outside of downtown Chicago,the UPS stores (formerly Mailbox Etc.) will have wi-fi access (for a fee) in mid-September as will many McDonalds (for a fee). <A href="http://www.computerworld.com/mobiletopics/mobile/story/0,10801,80914,00.html">UPS story</A></FONT></P>
<P><FONT size=2></FONT> </P>
so anything lower allows for a full contribution. Married filing separately: For a MAGI of $10,000 or more, no contribution is permitted and the phase out starts at $0. 3. Do you live with your spouse or file a joint return and your spouse is a participant in a qualified plan, but you are not? In this instance, your ability to make a contribution is reduced to zero if you have a MAGI over $166,000. Up to a MAGI of $156,000, you can take a full deductible contribution. 4. Did you receive “compensation” during the year? Contributions must be made from compensation received. Sorry, if you were unemployed all year, sheltering that big day at the track is not permitted. 5. Do you have cash? Contributions must be made in cash. You can't contribute stock or any other type of asset. 6. Do you file a joint tax return and make less than your spouse? If so, you may be eligible to make a contribution. This rule was originally intended for a spouse who did not work; however, it may apply to a spouse who works as well. You will need to apply the rules and work through the math. You may find a spouse has no compensation for the year can make the maximum (i.e. under age 50: $4,000) contribution. 7. Did your employer go bankrupt? The rules here are pretty narrow, but if you qualify you could be in for a nice surprise. You would have to have been a participant in a 401(k) plan with specific attributes and your employer filed Chapter 11. If you qualify, you would be eligible for catch-up contributions of $3,000 for years 2007-2009. And these catch-up provisions apply to all ages-you don't have to be 50 or older. Armed with this information, you should be in a position to determine if an additional deduction is available to you by contributing to an IRA. Article Source: http://www.upublish.info Tags: Articles Taxes **ARTTECHNORATI** Free Articles on Taxes and many other topics - Add this category to your RSS Reader
Another free Taxes article for you
About the Author:
Robert D. Cavanaugh, CLU
Robert D. Cavanaugh, CLU is a 36 year financial and veteran and author of the free newsletter, “The Estate Preservation Advisor”. To subscribe and get the free video, “How to Sell Your Life Insurance Policy for More Than the Cash Value”, go to theestatepreservationadvisor.com/freevideo.htm Free Articles on Taxes and many other topics
Here are some more estate planning articles...
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The game of commercial real estate can be won in many ways. It’s more of an essay test than true or false. There’s definitely more than one correct answer. A large percentage of the world’s Read more...
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A1 Technology Launches Its Independent Seo Division A-1
By John Parker, Sat Dec 10th
A-1 Technology Inc., a US based Offshore outsourcing firmlaunched its SEO division as a separate company, A-1Internetdesign Inc. Having established itself in the field ofsoftware and website Read more...
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Tax Preparation: Should You File Or Pay A Professional?
By Kenneth L Myers
You do not have to be a professional to do your taxes however if you have a complicated income structure or are just not quite sure, there are services to help you prepare taxes for yourself or your Read more...
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Step Three To Building Your Profitable Tax Lien Portfolio
By Joanne Musa
2007-01-19 Your first step to building a profitable tax lien or tax deed portfolio was deciding why you want to invest. This will Read more...
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The process of arranging your financial affairs so that your wealth will be distributed according to your wishes after your death and avoid undue taxation.
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