IRA stands for Individual Retirement Account, which allows you to save for your retirement by contributing for as long as you make taxable earnings. Taxable earnings include fees, bonuses, wages, salaries, taxable alimony, tip, separate maintenance payments, and commission on sales.

There are established IRA rules concerning how much money you can place to your IRA, in what events or conditions can the money be distributed from your account, and the funds that are required to be distributed after a particular period of time.

When you place money in a traditional IRA, you may have contributions that are tax-deductible under specific circumstances. The tax deductibility on your contributions relies on your income, tax filing status, and eligibility to participate and contribute to employer-sponsored retirement accounts.

Eligibility Requirements

For you to deduct the maximum contribution amount, you should become aware of the income limitations and IRA contribution rules of individuals and couples that wish to become active participant in this retirement plan.

If you are single or head of household, you are eligible to receive the full IRA deduction if your AGI or adjusted gross income is not more than $55,000. If your income is between $55,000 and $65,000, you will be permitted to get a partial deduction. On the other hand, if you earn more than $65,000, you will not be authorized to deduct any contributions to your traditional IRA.

If you have the status of “married filing jointly”, you contribute actively to your account, and your AGI limit is set at $89,000, you can have partial deduction if you and your spouse’s combined earning is between $89,000 and $109,000. You will get no deduction if your earning is more than $109,000. If your spouse’s income limit is set at $162,000 or lower and you are not an active IRA participant, then your spouse will benefit from full deduction, while he or she will be granted with partial deductions if his or her earning is between $162,000 and $172,000. No deduction is awarded if your combined yearly income is more than $172,000.

The Internal Revenue Service indicates the maximum IRA limit on deductible contribution. For 2010, you can house as much as $5,000 if you are less than 50 years old, and $6,000 if you are 50 years old and older.

Related posts:

1. Spousal IRA Basics
2. Traditional Vs Roth IRA
3. Roth IRA Rules You Should Know About