Traditional IRAs offer two large incentives to encourage retirement savings. First, Traditional IRA contributions may be tax-deductible on an IRA holder's tax return. Consult your tax advisor to find out if you qualify for the deduction. Second, earnings on a Traditional IRA are not taxed until the IRA holder takes the money out. Traditional IRA holders are not required to withdraw the funds until they reach the age of 70½.
In order to contribute to a Traditional IRA, the contributor (or spouse if married and filing a joint return) must have earned income equal or greater than the contribution amount. A Traditional IRA is not eligible to participants age 70½ and older. If contributions are made to both a Traditional and Roth IRA, the maximum contribution to the Traditional is reduced by the amount contributed to the Roth IRA. Your Modified Adjusted Gross Income (MAGI) and your participation in an employer sponsored retirement (QRP) will affect your deductibility. Please refer to the income deduction limits below:
Traditional IRA Deduction MAGI Ranges
Contribution amounts and catch-up contribution amounts will increase annually as follows:
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