Contributing to a Traditional IRA can create a current tax deduction, plus it provides for tax deferred growth. While long term savings in a Roth IRA may produce better after tax returns, a Traditional IRA may be an excellent alternative if you qualify for the tax deduction.
|Year||IRA contribution limit|
|2008 and after*||$5,000|
*Beginning in 2009, the contribution limit will adjust annually for inflation in $500 increments
In 2006, if you are 50 or older, you can make an additional â€œcatch-upâ€ contribution of $1000. This is an increase of $500 over the 2005 â€œcatch-upâ€ contribution. In order to qualify for the â€œcatch-upâ€ contribution, you must turn 50 by the end of the year in which you are making the contribution.
Traditional IRA Deduction Income Phase-Out Ranges
|Year||Single Taxpayers||Married Taxpayers Filing Jointly|
This calculator automatically determines if your tax deduction is limited by your income. However, there are two unusual situations not automatically accounted for where additional tax phase-outs are applied. First, if your spouse has an employer sponsored retirement plan but you do not, your tax deduction is phased out from $150,000 to $160,000. Second, if you are married filing separately and have an employer sponsored retirement plan, the income phase-out is from $0 to $10,000.