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Traditional IRA

Traditional IRAs
A traditional individual retirement account is a great way to save for your retirement.  Investing money into a traditional IRA even gives you a couple of tax benefits. 
 
How much can I Contribute?
For 2015 and 2016 the contribution limits for a traditional IRA are $5,500 and $6,500 if you’re age 50 or older by the end of the year.  If you make less than these amounts for the year then your contribution is limited to your taxable compensation.  The amount you contribute to a traditional IRA may be tax deductible, depending on your circumstances. 
 
Tax-deferred Growth
Money invested in a traditional IRA grows tax-deferred.  Simply put, when you sell something in the account, you don’t pay capital gains tax.  The only time you pay taxes is when you withdraw money from the account.  Tax-deferral allows the money to grow at a higher rate and acts as an incentive to invest your money for the long run. 
 
Contributions
Depending on your circumstance, contributions made to a traditional IRA may be fully or partially tax deductible.  In comparison, Roth IRA contributions are not tax deductible. 
 
Who Can Contribute?
You can contribute if you (or your spouse only if filing jointly) have taxable compensation, but only before you turn 70.5 years of age. 
 
What is the Deadline to make a Contribution to your Traditional IRA?
The deadline to make a contribution to your traditional IRA is the same as your tax return filing deadline, not including extensions.  If your tax return filing deadline is April 15, 2016, you have until then to make your contribution for 2015. 
 
When do I have to take Required Minimum Distributions (RMDs)
You must start taking distributions by April 1st following the year in which you turn age 70.5 and by December 31st for years after. 
 
Are my Withdrawals and Distributions Taxable?
At age 59.5 you can begin taking distributions.  If you take a distribution before age 59.5 you have to pay an additional 10% tax for early withdrawal unless you qualify for an exception.  Any deductible contributions and earnings you withdraw from you traditional IRA will be taxed at your income rate. 
 
Are my Contributions Deductible?
While that sounds like an easy question, the answer is, it depends.  The charts below help simplify the complex deduction rules. 
 
2015 IRA Deduction Limits If You are Covered by a Retirement Plan at Work
If Your Filing Status Is...
And Your Modified AGI Is...
Then You Can Take...
single or
$61,000 or less
a full deduction up to the amount of your contribution limit.
head of household
more than $61,000 but less than $71,000
a partial deduction.
 
$71,000 or more
no deduction.
married filing jointly or qualifying widow(er)
$98,000 or less
a full deduction up to the amount of your contribution limit.
 more than $98,000 but less than $118,000
 a partial deduction.
 $118,000 or more
 no deduction.
married filing separately
 less than $10,000
 a partial deduction.
 $10,000 or more
 no deduction.
If you file separately and did not live with your spouse at any time during the year, your IRA deduction is determined under the "Single" filing status.
 
2015 IRA Contribution Limits if you are not covered by a Retirement Plan at Work
If Your Filing Status Is...
And Your Modified AGI Is...
Then You Can Take...
single, head of household, or qualifying widow(er)
any amount
a full deduction up to the amount of your contribution limit.
married filing jointly or separately with a spouse who is not covered by a plan at work
 any amount
a full deduction up to the amount of your contribution limit.
married filing jointly with a spouse who is covered by a plan at work
$183,000 or less
a full deduction up to the amount of your contribution limit.
more than $183,000 but less than $193,000
a partial deduction.
$193,000 or more
no deduction.
married filing separately with a spouse who is covered by a plan at work
 less than $10,000
 a partial deduction.
 $10,000 or more
 no deduction.
If you file separately and did not live with your spouse at any time during the year, your IRA deduction is determined under the "Single" filing status.
 
2016 Ira Deduction Limits if you are Covered by a Retirement Plan at Work
If Your Filing Status Is...
And Your Modified AGI Is...
Then You Can Take...
single or
$61,000 or less
a full deduction up to the amount of your contribution limit.
head of household
more than $61,000 but less than $71,000
a partial deduction.
 
$71,000 or more
no deduction.
married filing jointly or qualifying widow(er)
$98,000 or less
a full deduction up to the amount of your contribution limit.
 more than $98,000 but less than $118,000
  a partial deduction.
 $118,000 or more
 no deduction.
married filing separately
 less than $10,000
  a partial deduction.
 $10,000 or more
 no deduction.
If you file separately and did not live with your spouse at any time during the year, your IRA deduction is determined under the "single" filing status.
 
2016 IRA Contribution Limits if you are not covered by a Retirement Plan at Work
If Your Filing Status Is...
And Your Modified AGI Is...
Then You Can Take...
single, head of household, or qualifying widow(er)
 any amount
a full deduction up to the amount of your contribution limit.
married filing jointly or separately with a spouse who is not covered by a plan at work
 any amount
a full deduction up to the amount of your contribution limit.
married filing jointly with a spouse who is covered by a plan at work
$184,000 or less
a full deduction up to the amount of your contribution limit.
more than $184,000 but less than $194,000
a partial deduction.
$194,000 or more
no deduction.
married filing separately with a spouse who is covered by a plan at work
 less than $10,000
 a partial deduction.
 $10,000 or more
 no deduction.
If you file separately and did not live with your spouse at any time during the year, your IRA deduction is determined under the "single" filing status.
Source: IRS.gov
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