Qualifications for IRA Tax Deductions
There are qualifications for IRA tax deductions that a taxpayer have to qualify in order to claim any IRA tax deductions. Below is a discussion of qualifications for IRA tax deductions as well as different types of IRAs.
What is an IRA?
An IRA is short for individual retirement agreement or individual retirement account which is personal savings plan that offers a tax advantages to encourage people to save for retirement. There are many types of retirement plans but the main types of IRAs are.
Contributions to traditional IRAs may be tax deductible depending on the taxpayer's income level as well as whether the taxpayer has an employer retirement plan.
Below are two important facts about contributing to a Roth IRA:
Contributions to a Roth IRA are not tax deductible, and
qualified distributions from Roth IRA are not taxable
Contributions to a Roth IRA are not reported on the federal income tax return and no adjustment to income is allowed for a Roth IRA.
Qualifications for contributing to a Traditional IRA
Not everyone can contribute to a traditional IRA. In order to be eligible to make a traditional IRA contribution, a taxpayer has to have taxable compensation such as:
- wages, salaries, tips
- self employment income
- taxable alimony and separate maintenance payments
The taxpayer also has to be under 70½ years old.
Are traditional IRA contributions tax deductible?
Traditional IRA contributions may or may not be tax deductible depending on the taxpayer's modified AGI and whether the taxpayer is covered by an employer retirement plan.