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IRS.gov Website
Publication 590
taxmap/pubs/p590-001.htm#en_us_publink1000230337

Chapter 1
Traditional IRAs(p7)

What's New for 2013(p7)


taxmap/pubs/p590-001.htm#en_us_publink1000308834
Traditional IRA contribution and deduction limit.(p7)
The contribution limit to your traditional IRA for 2013 will be increased to the smaller of the following amounts:
  • $5,500, or
  • Your taxable compensation for the year.
If you were age 50 or older before 2014, the most that can be contributed to your traditional IRA for 2013 will be the smaller of the following amounts:
  • $6,500, or
  • Your taxable compensation for the year.
For more information, see How Much Can Be Contributed? in this chapter.
taxmap/pubs/p590-001.htm#en_us_publink1000230346
Modified AGI limit for traditional IRA contributions increased.(p7)
For 2013, if you were covered by a retirement plan at work, your deduction for contributions to a traditional IRA is reduced (phased out) if your modified AGI is:
  • More than $95,000 but less than $115,000 for a married couple filing a joint return or a qualifying widow(er),
  • More than $59,000 but less than $69,000 for a single individual or head of household, or
  • Less than $10,000 for a married individual filing a separate return.
If you either lived with your spouse or file a joint return, and your spouse was covered by a retirement plan at work, but you were not, your deduction is phased out if your modified AGI is more than $178,000 but less than $188,000. If your modified AGI is $188,000 or more, you cannot take a deduction for contributions to a traditional IRA. See How Much Can You Deduct? in this chapter.
taxmap/pubs/p590-001.htm#en_us_publink1000308836
Net Investment Income Tax.(p7)
For purposes of the Net Investment Income Tax (NIIT), net investment income does not include distributions from a qualified retirement plan (for example, 401(a), 403(a), 403(b), 457(b) plans, and IRAs). However, these distributions are taken into account when determining the modified adjusted gross income threshold. Distributions from a nonqualified retirement plan are included in net investment income. See Form 8960, Net Investment Income Tax—Individuals, Estates, and Trusts, and its instructions for more information.

What's New for 2014(p7)


taxmap/pubs/p590-001.htm#en_us_publink1000254869
Modified AGI limit for traditional IRA contributions increased.(p7)
For 2014, if you are covered by a retirement plan at work, your deduction for contributions to a traditional IRA is reduced (phased out) if your modified AGI is:
  • More than $96,000 but less than $116,000 for a married couple filing a joint return or a qualifying widow(er),
  • More than $60,000 but less than $70,000 for a single individual or head of household, or
  • Less than $10,000 for a married individual filing a separate return.
If you either live with your spouse or file a joint return, and your spouse is covered by a retirement plan at work, but you are not, your deduction is phased out if your modified AGI is more than $181,000 but less than $191,000. If your modified AGI is $191,000 or more, you cannot take a deduction for contributions to a traditional IRA.

taxmap/pubs/p590-001.htm#en_us_publink1000270052Introduction

This chapter discusses the original IRA. In this publication the original IRA (sometimes called an ordinary or regular IRA) is referred to as a "traditional IRA." A traditional IRA is any IRA that is not a Roth IRA or a SIMPLE IRA. The following are two advantages of a traditional IRA:
taxmap/pubs/p590-001.htm#en_us_publink1000230352

Who Can Open
a Traditional IRA?(p7)

rule
You can open and make contributions to a traditional IRA if:
You can have a traditional IRA whether or not you are covered by any other retirement plan. However, you may not be able to deduct all of your contributions if you or your spouse is covered by an employer retirement plan. See How Much Can You Deduct, later.
taxmap/pubs/p590-001.htm#en_us_publink1000230354

Both spouses have compensation.(p7)

rule
If both you and your spouse have compensation and are under age 701/2, each of you can open an IRA. You cannot both participate in the same IRA. If you file a joint return, only one of you needs to have compensation.
taxmap/pubs/p590-001.htm#en_us_publink1000230355

What Is Compensation?(p8)

rule
Generally, compensation is what you earn from working. For a summary of what compensation does and does not include, see Table 1-1. Compensation includes all of the items discussed next (even if you have more than one type).
taxmap/pubs/p590-001.htm#en_us_publink1000230357

Wages, salaries, etc.(p8)

rule
Wages, salaries, tips, professional fees, bonuses, and other amounts you receive for providing personal services are compensation. The IRS treats as compensation any amount properly shown in box 1 (Wages, tips, other compensation) of Form W-2, Wage and Tax Statement, provided that amount is reduced by any amount properly shown in box 11 (Nonqualified plans). Scholarship and fellowship payments are compensation for IRA purposes only if shown in box 1 of Form W-2.
taxmap/pubs/p590-001.htm#en_us_publink1000230358

Commissions.(p8)

rule
An amount you receive that is a percentage of profits or sales price is compensation.
taxmap/pubs/p590-001.htm#en_us_publink1000230359

Self-employment income.(p8)

rule
If you are self-employed (a sole proprietor or a partner), compensation is the net earnings from your trade or business (provided your personal services are a material income-producing factor) reduced by the total of:
Compensation includes earnings from self-employment even if they are not subject to self-employment tax because of your religious beliefs.
taxmap/pubs/p590-001.htm#en_us_publink1000230360
Self-employment loss.(p8)
If you have a net loss from self-employment, do not subtract the loss from your salaries or wages when figuring your total compensation.
taxmap/pubs/p590-001.htm#en_us_publink1000230361

Alimony and separate maintenance.(p8)

rule
For IRA purposes, compensation includes any taxable alimony and separate maintenance payments you receive under a decree of divorce or separate maintenance.
taxmap/pubs/p590-001.htm#en_us_publink1000230363

Nontaxable combat pay.(p8)

rule
If you were a member of the U.S. Armed Forces, compensation includes any nontaxable combat pay you received. This amount should be reported in box 12 of your 2013 Form W-2 with code Q.
taxmap/pubs/p590-001.htm#en_us_publink1000230364

Table 1-1. Compensation for Purposes
of an IRA

Includes ... Does not include ...
  earnings and profits from
 property.
wages, salaries, etc. 
  interest and
 dividend income.
commissions. 
  pension or annuity
 income.
self-employment income. 
  deferred compensation.
alimony and separate maintenance. 
  income from certain
 partnerships.
nontaxable combat pay. 
  any amounts you exclude
 from income.
  
taxmap/pubs/p590-001.htm#en_us_publink1000230366

What Is Not Compensation?(p8)

rule
Compensation does not include any of the following items.