Publication 590
taxmap/pubs/p590-001.htm#en_us_publink1000230337taxmap/pubs/p590-001.htm#en_us_publink1000230346Modified AGI limit for traditional IRA contributions increased.
(p7)For 2012, 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 $92,000 but less than $112,000 for a married couple filing a joint return or a qualifying
widow(er),
- More than $58,000 but less than $68,000 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 $173,000 but less than $183,000. If your modified AGI is $183,000 or more, you cannot take a deduction for contributions to a traditional IRA. See
How Much Can You Deduct? in this chapter.
Qualified charitable distributions (QCD).
(p7)The provision that excludes up to $100,000 of qualified charitable distributions (QCD) from income has been extended. You can elect to treat a QCD made in January 2013 as if it was made in 2012. Additionally, any portion of a distribution from an IRA in December 2012 contributed as cash (or cash equivalent) to a charity before February 1, 2013 can be treated as a QCD for 2012 if it meets certain requirements. For more information, see
Qualified charitable distributions under
Are Distributions Taxable? in chapter 1.
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.
Modified AGI limit for traditional IRA contributions increased.
(p7)For 2013, 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 $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 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 $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.
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:
- You may be able to deduct some or all of your contributions to it, depending on your
circumstances.
- Generally, amounts in your IRA, including earnings and gains, are not taxed until they are
distributed.
You can open and make contributions to a traditional IRA if:
- You (or, if you file a joint return, your spouse) received taxable compensation during the year,
and
- You were not age 701/2 by the end of the year.
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.
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_publink1000230355Generally, 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).
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_publink1000230358An amount you receive that is a percentage of profits or sales price is compensation.
taxmap/pubs/p590-001.htm#en_us_publink1000230359If 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:
- The deduction for contributions made on your behalf to retirement plans,
and
- The deduction allowed for the deductible part of your self-employment taxes.
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_publink1000230360If 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_publink1000230361For 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_publink1000230363If 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 2012 Form W-2 with code Q.
taxmap/pubs/p590-001.htm#en_us_publink1000230364Table 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_publink1000230366Compensation does not include any of the following items.
- Earnings and profits from property, such as rental income, interest income, and dividend
income.
- Pension or annuity income.
- Deferred compensation received (compensation payments postponed from a past
year).
- Income from a partnership for which you do not provide services that are a material income-producing
factor.
- Conservation Reserve Program (CRP) payments reported on Schedule SE (Form 1040), line
1b.
- Any amounts (other than combat pay) you exclude from income, such as foreign earned income and housing
costs.
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