Nov 20

Maximum Contributions for Your Self Directed IRA and Roth IRA

The maximum contribution limit for a self-directed IRA for 2017 is $5,500 or $6,500 if you’re age 50 or older, or your taxable compensation for the year, if less. Contributions to a self-directed Roth IRA may be limited based on your filing status and income.

Contributions made to a self-directed IRA LLC must be made to the IRA administrator/custodian and may not be contributed directly to the LLC. Once the IRA contribution is made to the IRA administrator/custodian, the funds can then be transferred to the IRA LLC.

Is my IRA contribution deductible on my tax return?

If neither you nor your spouse is covered by an employer retirement plan, such as a 401(k), your deduction is allowed in full.

For contributions to a traditional IRA, the amount you can deduct may be limited if you or your spouse is covered by a retirement plan at work and your income exceeds certain levels. In the case of a Roth IRA, contributions aren’t deductible.

Maximum Contributions for Your Self Directed IRA and Roth IRACan I contribute to a traditional or Roth Self-Directed IRA if I’m covered by a retirement plan at work?

Yes, you can contribute to a traditional and/or Roth self-directed IRA even if you participate in an employer-sponsored retirement plan (including a SEP or SIMPLE IRA plan). If you or your spouse is covered by an employer-sponsored retirement plan, such as a 401(k) plan and your income exceeds certain levels, you may not be able to deduct your entire contribution.

Can I establish a self-directed IRA if only one spouse has earned income for the year?

Yes. If you file a joint return, you and your spouse can each make IRA contributions even if only one of you has taxable compensation. The amount of your combined contributions can’t be more than the taxable compensation reported on your joint return and cannot exceed the maximum IRA contributions for the year (for 2017 $5500 or $6500 if over the age of 50). It doesn’t matter which spouse earned the compensation.

How can I make a Roth IRA contribution if I earned too much money in 2017?

For 2017, if your modified adjusted gross income is below $181,000 and you file a joint return, you can make a Roth IRA contribution. For those who earned greater than $181,000 during the year, the IRS provides a formula, which will set forth the reduced maximum amount of Roth IRA contributions permitted for the year, if any.

One way to circumvent the Roth IRA income threshold rules, if to simply make an after-tax traditional IRA contribution and then convert the Traditional IRA into a Roth IRA. Since the Traditional IRA contribution was made after-tax there would be no tax on the Roth IRA conversion. This tactic was made possible when the IRS removed the income level restrictions for making Roth conversions in 2010.

Can I Make IRA contributions after age 70½

You can’t make regular contributions to a traditional IRA in the year you reach 70½ and older. However, you can still contribute to a Roth IRA and make rollover contributions to a Roth or traditional IRA regardless of your age.

To learn more about the self-directed IRA and self-directed Roth IRA contribution rules, please contact a self-directed IRA tax expert at 800-472-0646.

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Jul 05

What Are the Rules for Rolling Over a Roth IRA?

The contribution limitation does not apply to a “qualified rollover contribution,” but no rollover contribution other than a qualified rollover contribution is permitted. The term “qualified rollover contribution” includes only the following:

  • A rollover contribution from another Roth IRA.
  • A rollover contribution from a traditional IRA that satisfies the requirements for a rollover from one traditional IRA to another.
  • A rollover contribution from a qualified pension, profit-sharing, stock bonus, or annuity plan (qualified plan), tax-deferred annuity, or eligible deferred compensation plan that satisfies the requirements for rollovers from the particular type of plan.
  • A contribution to a Roth IRA by an individual who has received a military death gratuity.

A qualified rollover must satisfy all of the requirements for rollovers of and into IRAs generally, which means, for example, that a rollover contribution must made within 60 days of the rolled-over distribution and the rollover privilege is denied to beneficiaries of IRA owners (other than surviving spouses). For years beginning before 2010, an individual may not make a qualified rollover from a traditional IRA, qualified plan, tax-deferred annuity, or eligible deferred compensation plan to a Roth IRA for his or her benefit if his or her adjusted gross income for the year exceeds $100,000.

Please contact one of our Roth IRA Experts at 800-472-0646 for more information.

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Jun 16

How Does a Roth IRA Contribution Work?

Assume individual Jane decides to set aside $1,000 of her pretax income for an IRA contribution. She could contribute the entire $1,000 to a traditional IRA because the deduction for the contribution would effectively eliminate any current tax on the $1,000. Since a contribution to a Roth IRA is not deductible, she could contribute to a Roth IRA only the amount remaining after paying tax on the $1,000. Assume T is, at all times, taxed at a flat 30 percent. She could therefore make a Roth IRA contribution of $700 ($1,000 less 30 percent thereof).

For 2017, the maximum you can contribute to a Roth IRA is $5,500, or $6,500 if you are age 50 or older.

How Does a Roth IRA Contribution Work?

Please contact one of our Roth IRA Experts at 800-472-0646 for more information.

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Jul 01

Contributing to a Roth IRA

A taxpayer’s contributions to Roth IRAs during any year may not exceed a dollar ceiling (or, if less, the taxpayer’s compensation income), reduced by deductible contributions for the year to traditional IRAs. For 2016, the dollar ceiling will be $5,500. Also, for 2016, the ceiling is raised by $1,000 for individuals who are at least 50 years old at year-end.

Roth IRA Contribution Rules for 2016The maximum contribution is the same for traditional and Roth IRAs, but this ceiling applies differently to them because contributions to Roth IRAs are after-tax funds, whereas contributions to traditional IRAs are pretax funds. Assume A contributes $3,000 to a Roth IRA for 2016, and B contributes the same amount for the year to a traditional IRA; both are taxed at 30 percent at all times. Although only $3,000 of salary income was required to fund B’s contribution, A’s contribution effectively takes pretax income of $4,286 ($4,286, less 30 percent thereof, is $3,000). If each of the IRAs earns 8 percent, and each of the contributors withdraws the accumulated funds on retirement 10 years after the contributions are made, A will have $6,477 ($3,000 plus earnings at 8 percent for 10 years), and B will have $4,534 ($6,477 less 30 percent thereof).

Taxpayer’s ability to make a Roth IRA contribution begins to phase out when your adjusted gross income (AGI) exceeds $184,000 for joint filers and $117,000 for single filers in 2016. In addition, you are not permitted to make a contribution at all when your AGI exceeds $194,000 (for joint filers) or $132,000 (for single filers). Note: with a traditional IRA you may make a contribution even if your income is high and you are covered by an employer’s plan. However, you may not be able to deduct the contribution on your return.

Contributions in excess of the maximum are subject to a 6 percent excise tax unless the excess and income thereon are distributed to the owner not later than the due date of his or her return for the year (taking extensions into account). Income included in a distribution made within this time is included in the owner’s gross income for the year of the contribution, not the year of the distribution.

As with traditional IRAs, contributions to a Roth IRA are deemed made on the last day of the year if made before the following April 15. Contributions to a Roth IRA, unlike a traditional IRA, can be made by taxpayers older than 70 1/2.

Please contact one of our Roth IRA Experts at 800-472-0646 for more information.

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Mar 01

Roth IRA Contribution Rules for 2016

A taxpayer’s contributions to Roth IRAs during any year may not exceed a dollar ceiling (or, if less, the taxpayer’s compensation income), reduced by deductible contributions for the year to traditional IRAs. For 2016, the dollar ceiling will be $5,500. Also, for 2016, the ceiling is raised by $1,000 for individuals who are at least 50 years old at year-end.

Roth IRA Contribution Rules for 2016The maximum contribution is the same for traditional and Roth IRAs, but this ceiling applies differently to them because contributions to Roth IRAs are after-tax funds, whereas contributions to traditional IRAs are pretax funds. Assume A contributes $3,000 to a Roth IRA for 2016, and B contributes the same amount for the year to a traditional IRA; both are taxed at 30 percent at all times. Although only $3,000 of salary income was required to fund B’s contribution, A’s contribution effectively takes pretax income of $4,286 ($4,286, less 30 percent thereof, is $3,000). If each of the IRAs earns 8 percent, and each of the contributors withdraws the accumulated funds on retirement 10 years after the contributions are made, A will have $6,477 ($3,000 plus earnings at 8 percent for 10 years), and B will have $4,534 ($6,477 less 30 percent thereof).

Taxpayer’s ability to make a Roth IRA contribution begins to phase out when your adjusted gross income (AGI) exceeds $184,000 for joint filers and $117,000 for single filers in 2016. In addition, you are not permitted to make a contribution at all when your AGI exceeds $194,000 (for joint filers) or $132,000 (for single filers). Note: with a traditional IRA you may make a contribution even if your income is high and you are covered by an employer’s plan. However, you may not be able to deduct the contribution on your return.

Contributions in excess of the maximum are subject to a 6 percent excise tax unless the excess and income thereon are distributed to the owner not later than the due date of his or her return for the year (taking extensions into account). Income included in a distribution made within this time is included in the owner’s gross income for the year of the contribution, not the year of the distribution.

As with traditional IRAs, contributions to a Roth IRA are deemed made on the last day of the year if made before the following April 15. Contributions to a Roth IRA, unlike a traditional IRA, can be made by taxpayers older than 70 1/2.

Please contact one of our Roth IRA Experts at 800-472-0646 for more information.

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Oct 13

Self-Directed IRA Maximum Contribution Limits

The maximum contribution limit for a self-directed IRA for 2015 is $5,500 or $6,500 if you’re age 50 or older, or your taxable compensation for the year, if less. Contributions to a self-directed Roth IRA may be limited based on your filing status and income.

Contributions made to a self-directed IRA LLC must be made to the IRA administrator/custodian and may not be contributed directly to the LLC. Once the IRA contribution is made to the IRA administrator/custodian, the funds can then be transferred to the IRA LLC.

Is my IRA contribution deductible on my tax return?

If neither you nor your spouse is covered by an employer retirement plan, such as a 401(k), your deduction is allowed in full.

For contributions to a traditional IRA, the amount you can deduct may be limited if you or your spouse is covered by a retirement plan at work and your income exceeds certain levels. In the case of a Roth IRA, contributions aren’t deductible.

Can I contribute to a traditional or Roth Self-Directed IRA if I’m covered by a retirement plan at work?

Yes, you can contribute to a traditional and/or Roth self-directed IRA even if you participate in an employer-sponsored retirement plan (including a SEP or SIMPLE IRA plan). If you or your spouse is covered by an employer-sponsored retirement plan, such as a 401(k) plan and your income exceeds certain levels, you may not be able to deduct your entire contribution.

Can I establish a self-directed IRA if only one spouse has earned income for the year?

Yes. If you file a joint return, you and your spouse can each make IRA contributions even if only one of you has taxable compensation. The amount of your combined contributions can’t be more than the taxable compensation reported on your joint return and cannot exceed the maximum IRA contributions for the year (for 2015 $5500 or $6500 if over the age of 50). It doesn’t matter which spouse earned the compensation.

How can I make a Roth IRA contribution if I earned too much money in 2015?

For 2015, if your modified adjusted gross income is below $181,000 and you file a joint return, you can make a Roth IRA contribution. For those who earned greater than $181,000 during the year, the IRS provides a formula, which will set forth the reduced maximum amount of Roth IRA contributions permitted for the year, if any.

One way to circumvent the Roth IRA income threshold rules, if to simply make an after-tax traditional IRA contribution and then convert the Traditional IRA into a Roth IRA. Since the Traditional IRA contribution was made after-tax there would be no tax on the Roth IRA conversion. This tactic was made possible when the IRS removed the income level restrictions for making Roth conversions in 2010.

Can I Make IRA contributions after age 70½

You can’t make regular contributions to a traditional IRA in the year you reach 70½ and older. However, you can still contribute to a Roth IRA and make rollover contributions to a Roth or traditional IRA regardless of your age.

To learn more about the self-directed IRA and self-directed Roth IRA contribution rules, please contact a self-directed IRA tax expert at 800-472-0646.

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