IRAs

5 Traditional IRAs

Who Can Contribute?

  • Anyone under age 70 1/2 who has income from compensation (or who is filing jointly with a spouse who earns compensation)
  • Anyone who has received a distribution from a qualified retirement plan and decides to roll over the proceeds of the plan into an IRA

How much can I contribute?

  • $5,500 for 2016

For owners age 50 and older, your limits increase to $6,500 for 2016.

  • Cannot exceed compensation
  • Reduces contributions that can be made to Roth IRAs

Who can make deductible contributions?

Fully-deductible contributions:

  • Single individuals not active in employer retirement plans
  • Single individuals active in employer retirement plans with MAGI (modified adjusted gross income) of less than: $61,000 (2016)
  • Married couples with neither spouse active in an employer retirement plan
  • Married individuals active in employer retirement plans with joint tax returns showing MAGI of less than: $98,000 (2016)

What are the tax advantages?

  • Earnings grow tax-deferred until withdrawn
  • Contributions may be tax-deductible

When can I withdraw without restrictions?

Withdraw penalty free for any of the following reasons:

  • Qualified higher-education expenses
  • First-time homebuyer expenses
  • Age 59 1/2
  • Disability
  • Qualifying medical expenses exceeding 10% of adjusted gross income
  • Payment to beneficiaries up the owner’s death
  • Payment of health insurance premiums while unemployed for 12 weeks or longer
  • Federal tax levy
  • Pre-59 1/2 periodic distributions
  • Qualified reservist distributions

Roth IRA

Who can contribute?

Anyone who has income from compensation (or who is filing jointly with a spouse who earns compensation), with the following MAGI:

  • Up to $117,000 (2016) for single filers
  • Up to $184,000 (2016) for joint filers

Reduced contributions allowed for higher incomes:

  • Up to $132,000 (2016) for single filers
  • Up to $194,000 (2016) for joint filers

How much can I contribute?

  • $5,500 for 2016

For owners age 50 and older, your limits increase to $6,500 for 2016.

  • Cannot exceed compensation
  • Reduces contributions that can be made to traditional IRAs

Who can make deductible contributions?

No one can deduct contributions

What are the tax advantages?

  • Earnings are tax-free if account is open for five years and withdrawn for qualified reason (age 59 1/2, disability, death, or a first-time home purchases)
  • Not required to start withdrawals at age 70 1/2

When can I withdraw without restrictions?

  • Regular contributions can be withdrawn tax-free and penalty-free at any time
  • After the account has been open for five tax years, earning can be withdrawn tax-free and penalty-free for any of these reasons: age 59 1/2, disability, death, or a first-time home buyer purchases

Education IRA – Coverdell Education Savings Account

Who can contribute?

Anyone who has MAGI:

  • Up to $95,000 for single filers
  • Up to $190,000 for joint filers

Some people with higher MAGI may be able to make smaller contributions

Contributions are not allowed after the designated beneficiary reaches age 18 (except for special needs designated beneficiaries)

How much can I contribute?

  • $2,000 per child per tax year
  • Limit applies to all Coverdell ESAs for the same child

Who can make deductible contributions?

No one can deduct contributions

What are the tax advantages?

  • Withdrawals for certain qualified education expenses are tax-free
  • Qualified education expenses include tuition, fees, books, computer equipment and technology required for elementary, secondary and post-secondary education
  • A designated beneficiary may receive tax-free distributions from Coverdell ESA in the same year he or she claims the Lifetime Learning or HOPE scholarship tax creditsp

When can I withdraw without restrictions?

  • Withdrawals are tax-free and penalty-free only for qualified education expenses (earnings are subject to tax ad penalty for most other withdrawals)
  • Funds can be transferred from one child’s account to an account for another child in the family