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INDIVIDUAL RETIREMENT ACCOUNTS
IRA Contribution Limits
The Economic Growth and Tax Relief Reconciliation Act, which went into
effect on January 1, 2002, included major changes to the laws governing
Individual Retirement Accounts (IRAs), providing for increases in IRA
contribution limits.
| Year |
Traditional
or Roth |
Traditional
or Roth
Catch Up |
Simple |
Simple Catch Up |
401(k)
403(b) |
401(k)
403(b)
Catch Up |
| 2007 |
$4,000 |
$5,000 |
$10,500 |
$12,500 |
$15,000 |
$20,000 |
| 2008 |
$5,000 |
$6,000 |
$10,500 |
$13,000 |
$15,500 |
$20,000 |
| 2009 |
$5,000 |
$6,000 |
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--- |
--- |
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Traditional/Roth
IRA Contribution Limits
The contribution limit for both Traditional and Roth IRAs is $4,000 and
will increase again, to $5,000 in 2008. After 2008, the contribution
limit will be annually indexed in $500 increments, adjusted for the
cost-of-living (COL). The chart below shows the contribution limits for
both the Traditional and Roth IRA.
Year Traditional/Roth
2007 $4,000
2008 $5,000
2009 $5,000
| Year |
Traditional/Roth |
| 2007 |
$4,000 |
| 2008 |
$5,000 |
| 2009 |
$5,000 |
“Catch
up” Contribution Limits
Americans who have reached the age of 50 have the ability to contribute
more to their retirement account under the "catch up" provisions of the
2002 legislation. The amount of the "catch up" for Traditional and Roth
IRAs is capped at $1,000 for 2007 and $1,000 for 2008. In order to
qualify, an individual must have reached the age of 50 in the year in
which they make the "catch up" contribution.
| Year |
Traditional/Roth Catch UP |
| 2007 |
$5,000 |
| 2008 |
$6,000 |
| 2009 |
$6,000 |
Can you deduct it?
Whether you can deduct that contribution depends on your income and the
type of IRA. Roth IRAs are funded with after-tax dollars and therefore
not deductible. (Their chief appeal is that anything they earn is
tax-free when you withdraw the money, unlike a traditional IRA.) Those
income levels got a boost this year.
Through your employer's retirement plan, you can take a full deduction
for 2007:
• If you're a married couple
filing jointly or a qualifying widow or widower and your modified
adjusted gross income is more than $83,000 but less than $103,000.
• If you're a single taxpayer or
a head of a household and your modified adjusted gross income is more
than $52,000 but less than $62,000.
• If you're a spouse filing
separately and your modified adjusted gross income is less than $10,000.
A nonworking spouse may make a deductible contribution of $4,000 so
long as the couple's adjusted gross income doesn't exceed $156,000.
Deductibility is phased out between $156,000 and $166,000.
2008 deductibility limits
These are the income limits for making deductible IRA contributions in
2008:
• If you're a married couple
filing jointly or a qualifying widow or widower, your income must be
more than $85,000 but less than $105,000.
• If you're a single taxpayer or
a head of a household, your income must be more than $53,000 but less
than $63,000.
• If you're a spouse filing
separately, your income must be less than $10,000.
A nonworking spouse will be
allowed to make a deductible contribution
of $4,000 so long as the couple's adjusted gross income doesn't exceed
$156,000. Deductibility will be phased out between $159,000 and $169,000
For information contact us.
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