Understanding the Rules and Limits of Contributions to an IRA |

1.The limit on contributions to an IRA for 2023 is roughly $6,500.If you're 50 and older you can contribute $7,500.These are called "catch-up" contributions. 2.The items that are considered earned income for a traditional IRA is income earned from a job or self-employment position.For example wages, salaries, commission, tips, bonuses, alimony by the recipient, stipend payments from a graduate or postdoctoral study (after 2019), or net income for a self-employed person are all earned income for IRAs. 3.Spousal IRAs are for those who do not have earned income but are eligible because their spouse does have earned income.The earned income requirement is equal to that of the total contribution to both spouses' IRAs.These can have contributions up to the IRA limit, which is $6,500 for 2023, and $7,500 if 50 years and older. 4.Excess contributions are subject to a 6% excise tax for each year and the excess contribution remains in the account. 5.Those who are not covered and file single or MFJ can deduct up to the contribution limit for the year, $6,500. 6.Those who are covered are file single and have a modified AGI of $73,000 or less and can deduct up to the contribution limit.Those who file single and have a modified AGI between $73,000 and not more than $83,000 can have a partial deduction.Those who file single and have an AGI of more than $83,000 get no deduction.MFJ folks who have a modified AGI of less than $116,000 can deduct up to their limit and those who have more than $136,000 get no deduction. 7.The spouse that's not covered, or an active participant, can have a deductible traditional IRA contribution.The joint AGI can't exceed $199,000. 8.Active participants are those individuals who are employed at any time during the year and are eligible to participate in the plan even if they don't want to contribute to the plan. 9.The minimum distribution rules for traditional IRAs are you have to start taking distributions starting at the year the owner turns 70.5 years old. 10. The early withdrawal penalty applicable to traditional IRAs are if the owner takes a distribution before the age of 59.5 years old. 11. Individual retirement annuities differ from traditional IRAs because it's an annuity issued by the insurance company instead.All the same rules apply however. 12. The Roth IRA is a contribution with after-tax dollars and the owners money gros tax-free. A Traditional IRA is a contribution made before or after-tax dollars and the owners money grows tax-deferred.The withdrawals associated with a traditional IRA are taxed at current income after the age of 59.5 years old. 13. They are the same. 14. The 2023 AGI income limits for contributions to a Roth IRA are if you are filling as MFJ or a qualifying widower in the amount of not less than $218,000 AGI.If filling single or HOH you have a AGI of $138,000 than you can contribute the full amount. 15. The income limits for converting a traditional IRA to a Roth IRA are none.There are no limits for conversions. 16. The assets of a qualified plan can be concverted into a Roth IRA by making sure you transfer the funds directly to the financial institutional through a trustee-to-trustee transfer.