IRA General Information
Traditional IRA
Who Can Contribute?
- Anyone under the age of 70 ½ who has income from compensation (or who is filing jointly with a spouse who earns compensation)
- Anyone who has received a distribution from a qualified retirement plan and decides to roll over the proceeds of the plan into an IRA
How Much?
| YEAR | REGULAR CONTRIBUTION | OVER AGE 50 |
|---|---|---|
| 2012 | $5,000 | $6,000 |
| 2013 | $5,500 | $6,500 |
- Cannot exceed compensation
- Reduces contributions that can be made to Roth IRAs
Can I Deduct My Contributions?
- Contributions to traditional IRAs may be tax deductible. Consult a tax professional or IRS Publication 590.
What are the Tax Advantages?
- Earnings grow tax-deferred until withdrawn
- Contributions may be tax deductible
When can I Withdraw Without Penalty?
Withdrawals after the age of 59 ½ are not subject to the 10% IRS early withdrawl penalty. Other exceptions may apply such as:
- Qualified higher-education expenses
- First-time home purchase
- Disability
For a complete list of exceptions to the penalty, and to determine if your withdrawal qualifies, consult a tax professional.
Not intended as tax advice. Please consult a tax professional.
Roth IRA
Who Can Contribute?
- Anyone who has income from compensation (or who is filing jointly with a spouse who earns compensation) with the following Modified Adjusted Gross Income (MAGI) from the federal tax form
- Up to $112,000 (single filers)
- Up to $178,000 (joint filers)
- Reduced contributions allowed for higher incomes (up to $127,000 for single filers and $188,000 for joint filers)
How Much?
| YEAR | REGULAR CONTRIBUTION | OVER AGE 50 |
|---|---|---|
| 2012 | $5,000 | $6,000 |
| 2013 | $5,500 | $6,500 |
- Can not exceed compensation
- Reduces contributions that can be made to Traditional IRAs
Can I Deduct My Contributions?
-
Roth IRA Contributions must be included in your taxable income and therefore are not tax deductible.
- You may qualify for a savers tax credit. Consult a tax professional to determine if your contribution qualifies.
-
What are the Tax Advantages?
- Earnings grow tax-deferred until withdrawn
- Earnings may be withdrawn tax-free if the account is open for five tax years and withdrawn for a qualified reason (age 59 ½, disability, death or a first time home purchase*)
- Not required to start withdrawals at age 70 ½
When can I Withdraw without Penalty?
- Regular contributions can be withdrawn tax- and penalty-free at any time
- After the account has been open for five tax years, earnings can be withdrawn tax- and penalty-free for any of these reasons
- Age 59 ½
- Disability
- Death
- First time home purchase*
- For a complete list of exceptions to the penalty, and to determine if your withdrawal qualifies, consult a tax professional.
Not intended as tax advice. Please consult a tax professional.
* Lifetime limit for exemption on first-time home-purchase is $10,000
Coverdell Education Savings Account (ESA)
Who Can Contribute?
Anyone who has a Modified Adjusted Gross Income (MAGI) from the Federal tax form can contribute.
- Up to $95,000 for single filers
- Up to $190,000 for joint filers
- Reduced contributions may be allowed for higher MAGI
- Contributions not allowed after the beneficiary reaches age 18 (except for special-needs beneficiaries)
How Much?
- $2,000 per child
- Limit applies to all Coverdell ESAs for the same child
Can I Deduct My Contributions?
Consult a tax professional.
What are the Tax Advantages?
- Withdrawals for certain qualified education expenses are tax-free
- Special-needs beneficiaries can withdraw funds tax-free to pay for qualified education expenses at any age
- Qualified education expenses may include tuition, fees, books, computer equipment and technology required for elementary, secondary and post-secondary educations
- A beneficiary may receive tax free distributions from a Coverdell ESA in the same year he or she claims the Lifetime Learning or HOPE Scholarship credits
When can I Withdraw without Restriction?
- Withdrawals are tax and penalty-free only for qualified expenses (earnings are subject to tax and penalty for most other withdrawals)
- Funds can be transferred from one child's account to another child's account within the same family
Not intended as tax advice. Please consult a tax professional.
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