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A traditional IRA is the "original" IRA. It is available to anyone, regardless of adjusted gross income. Contributions to a traditional IRA may be deductible from current federal taxable income. Taxes must be paid upon withdrawal of any deductible contributions plus earnings and on the earnings from your non-deductible contributions.
Features of a Traditional IRA
- Individuals may contribute up to $6,000 in 2019 to a traditional IRA, and be under age 70 1/2. (If you have both a traditional and Roth IRA, your total contributions cannot exceed the contribution limit per person per tax year.) Individuals age 50 and older may increase their contributions by $1,000 in 2019.
- Contributions may be tax deductible from your current federal income.
- The earnings on your investments are tax-deferred until you make withdrawals from the traditional IRA.
- Prior to age 59 1/2, distributions may be taken from a traditional IRA for certain reasons without incurring a 10% penalty on earnings.
- By age 70 1/2, you must begin to take certain minimum distribution amounts from your traditional IRA.
When can you deduct contributions to a traditional IRA?
As you can see, part of the attractiveness of a traditional IRA is the potential to take a tax deduction from your current federal income on your contributions. You can fully deduct your contributions to your traditional IRA from your federal taxable income if:
- You or your spouse are not active participants in an employer-sponsored retirement plan, including pension, profit sharing, 401(k), SEP/IRA or 403(b) tax-sheltered annuity plans; or
- Your spouse is an active participant in an employer-sponsored plan and you are an at-home spouse or a spouse not covered by a retirement plan and your joint income is below $189,000 in 2018 or
- You are an active participant in an employer-sponsored plan and your adjusted gross income (AGI) is $64,000 in 2019 or less for single taxpayers. For married taxpayers filing jointly it is $103,000 in 2019.
You can partially deduct your contribution to a traditional IRA even if you participate in an employer-sponsored retirement plan if your AGI is between $64,000 and $74,000 in 2019 for single taxpayers. For married taxpayers filing jointly it is between $103,000 and $123,000 in 2019.
Different rules apply if you are married and file separate income tax returns. Consult your tax advisor for more information.
None of the information in this document should be considered as tax advice. You should consult your tax advisor for information concerning your individual situation.