IRA Information

 IRS per diem rates?

This information can be obtained from the IRS web site.

Publication 1542

 IRA - Roth & Traditional

What is the difference between a traditional IRA and a Roth IRA?

In 2012, individuals who earn at least $5,000 in compensation may contribute up to $5,000 total to one or more IRAs. Married couples may contribute as much as $10,000 ($5,000 for each spouse), even if one spouse does not work, as long as joint compensation is at least as much as the contributed amount. An additional $1,000 catch-up contribution is allowed to individuals who have reached age 50.

In 2011, individuals who earn at least $5,000 in compensation may contribute up to $5,000 total to one or more IRAs. Married couples may contribute as much as $10,000 ($5,000 for each spouse), even if one spouse does not work, as long as joint compensation is at least as much as the contributed amount. An additional $1,000 catch-up contribution is allowed to individuals who have reached age 50.

Traditional IRAs – Contributions to traditional (non-Roth) IRAs may be tax deductible. You may deduct your entire allowable contribution – no matter how high your income is – if neither you nor your spouse is eligible to participate in an employer-sponsored retirement plan. When one or both spouses are eligible for plan participation, deductions for contributions to traditional IRAs may be limited or eliminated when AGI exceeds specific levels. 

For 2012, the deduction phase out ranges for plan participants are: $58,000 - $68,000 of AGI for single and head-of-household filers, $92,000 - $112,000 for joint filers and $0 to $10,000 for married-separate filers. The phase out range for a married person who isn’t a plan participant (but whose spouse is a plan participant) is $173,000 - $183,000.

For 2011, the deduction phase out ranges for plan participants are: $56,000 - $66,000 of AGI for single and head-of-household filers, $90,000 - $110,000 for joint filers and $0 to $10,000 for married-separate filers. The phase out range for a married person who isn’t a plan participant (but whose spouse is a plan participant) is $169,000 - $179,000.

Roth IRAs – A Roth IRA is a nondeductible IRA in which account earnings are potentially tax free, rather than tax deferred. Tax-free distributions of Roth IRA earnings are available after a five-year waiting period when:

  • The account owner is at least age 59 ½
  • The money is used for first-time homebuyer’s expenses up to $10,000
  • The account owner becomes disabled or dies

For 2012, eligibility to contribute is phased out as AGI rises from $110,000 to $125,000 for unmarried filers, $173,000 to $183,000 for joint filers, and $0 to $10,000 for married-separate filers. For 2011, eligibility to contribute is phased out as AGI rises from $107,000 to $122,000 for unmarried filers, $169,000 to $179,000 for joint filers, and $0 to $10,000 for married-separate filers.