2010 IRA Contribution Limits
Knowing the 2010 IRA contribution limits does not only keep you updated about the recent changes that influence your retirement account. This also provides you an opportunity to accomplish and take advantage of as many opportunities as possible in preparation for a comfortable retirement.
The Internal Revenue Service (IRS) has recently released the IRA rules for deduction and contribution limits for 2010. IRAs are an excellent way to set aside sufficient amount of money to support you financially on your retirement, even if you are also a 401(k) account owner. Learning about the amount of money you can contribute and if your contributions fall under the deductible category can be a little confusing at times. To discover these limits, you need to evaluate and study the following factors:
- Are you contributing to a Roth, traditional IRA, or both?
- Will you become 50 years old or older by the year 2011?
- How much is your MAGI or modified adjusted gross income?
- How much is your taxable compensation?
- Are you or your spouse covered by an employer-sponsored retirement account?
In reality, many people don’t realize that almost anyone can make contributions to a traditional IRA not considering the income or retirement accounts at work, though it may not be fully or partially deductible.
These are numerous things to consider with the 2010 IRA contribution limits. If by this year your taxable compensation drops under the limits, it automatically becomes your contribution limit – meaning, you are not allowed to contribute to an Individual Retirement Account more than what you actually earn.
The highest contribution amount listed in the Roth IRA rules and the highest deductible contribution to a traditional IRA may be lessened based on your modified adjusted gross income (MAGI).
For 2010, the limits on contributions have stayed at $5,000 same as the 2009 limit. Likewise, the catch-up contributions have as well been pinned at 2009 level of $1,000.
Do you want to know how much of the IRA contributions become deductible? The answer to this question relies on the following aspects:
- Your present tax filing status.
- Whether you or your spouse established a retirement account at work.
- Your MAGI
You’ll realize that in some instances you are only allowed to receive a partial deduction. This is because as your compensation increases within the particular ranges of MAGI, the amount of money that can be deducted concurrently decreases.
If you have hired the services of a tax professional to prepare your returns, you can ask him or her about the essential information on calculating accurately the amount that you can deduct. However, if you calculate your own taxes, it’s best for you to take advantage of free online tools specifically made for this purpose.
While it’s critical to familiarize yourself about the 2010 IRA contribution limits, if you have a self-directed account, you should also update yourself about the proscribed and allowed investments. Keep in mind that IRAs can’t be invested in collectibles like rugs, artworks, metals, antiques, gems, alcoholic beverages, coins, stamps, and other tangible personal items. In addition, you should understand that some financial companies implement further restrictions on IRA investments.