| IRA contributions and Special Circumstances |
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| What is IRA ? |
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An individual retirement arrangement (IRA) is a personal savings plan that gives you tax advantages for setting aside money for your retirement. IRA rules give you benefits of tax relief for persons affected by Hurricane Katrina and if you have funds in certain retirement plans, including IRAs, you may qualify for tax-favored withdrawals and recontributions. |
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| What is the maximum amount that can be contributed towards IRA? |
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The maximum contributed limit to your traditional IRA for 2006 increase to the smaller of the following amounts: -
- $4,000 or Your taxable compensation for the year
If you reached age 50 before 2007, the most that could be contributed to your traditional IRA for 2006 is the smaller of the following amounts:-
- $5000 or your taxable compensation for the year.
Roth IRA contribution limit:-
If contributions were made on your behalf only to Roth IRAs, your contribution limit for 2006 is generally the lesser of $4000 or your taxable compensation for the year. If you were 50 or older in 2006 and contributions on your behalf were made only to Roth IRAs, your contribution limit for 2006 is generally the lesser of $5000 or your taxable compensation for the year.
However, if your modified adjusted gross income (AGI) is above a certain amount, your contribution limit may be reduced.
If you or your spouse was covered by an employer retirement plan at any time during the year for which contributions were made, your deduction may be further limited. |
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| Are distribution received from IRA’s exempt from tax? |
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Yes distribution received from a traditional IRA is taxable in the year when it is received as ordinary income |
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