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A Traditional IRA is a tax-advantaged arrangement that allows earnings and deductible contributions to grow tax-deferred. That means you don't pay income taxes on the earnings and deductible contributions of your IRA until you begin taking withdrawals, usually after you retire and possibly are in a lower tax bracket.1 Here's more information about Traditional IRAs.
Tax Advantages
Contributions may be deductible from your gross income on your federal income tax return for the year in which the contributions are made. Earnings grow on a tax-deferred basis. Deductible contributions and earnings are subject to federal income tax when withdrawn.
Eligibility Requirements
You must not attain the age of 70½ during the year you contribute to a Traditional IRA. You must also have earned income (compensation) in order to contribute to a Traditional IRA.
Annual Contribution Limits
In tax year 2007, you can make annual contributions to a Traditional IRA of up to $4,000 and up to $5,000 for 2008 tax year or 100% of your earned income, whichever is less. If you're married, the maximum combined amount you and your spouse can contribute to separate IRAs for the 2007 tax year is $8,000 and $10,000 for the 2008 tax year provided that either you or your spouse has earned income of at least that amount.
If you are age 50 or older, you may make additional "catch-up" contributions to your IRA.
*Please see your tax advisor for any apllicable tax laws and eligibility requirements.
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