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 Previous Page: Publication 17 - Your Federal Income Tax - Adjustments to Income Next Page: Publication 17 - Your Federal Income Tax - Roth IRAs
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taxmap/pub17/p17-091.htm#TXMP2a4e5963 Chapter 17 |
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taxmap/pub17/p17-091.htm#TXMP4b65cf0a |
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For 2007, 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 adjusted gross income (AGI) is:
If you 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 $156,000 but less than $166,000. If your modified AGI is $166,000 or more, you cannot take a deduction for contributions to a traditional IRA. See How Much Can You Deduct? later.
For 2007, your Roth IRA contribution limit is reduced (phased out) in the following situations.
A direct transfer from a deceased employee's qualified pension, profit-sharing or stock bonus plan, annuity plan, tax-sheltered annuity (section 403(b)) plan, or governmental deferred compensation (section 457) plan to an IRA set up to receive the distribution on your behalf can be treated as an eligible rollover distribution if you are the designated beneficiary of the plan and not the employee's spouse. The IRA is treated as an inherited IRA. For more information about rollovers, see Rollovers in Publication 590.
If you are covered by a high deductible health plan (HDHP), you may be able to make a nontaxable HSA funding distribution from your IRA (other than a SEP or SIMPLE IRA) that would otherwise be included in income. The distribution must be a direct trustee-to-trustee transfer to an HSA. The distribution will be nontaxable to the extent it is not more than the limit on your annual HSA contributions.
Generally, you can make only one nontaxable HSA funding distribution during your lifetime. However, if you change your HDHP coverage from self-only to family, you may be able to make an additional distribution during the same year. For more information, see Publication 969, Health Savings Accounts and Other Tax-Favored Health Plans.
If you participated in a 401(k) plan and the employer who maintained the plan went into bankruptcy in an earlier year, you may be able to contribute up to $7,000 to your IRA. For more information, see Catch-up contributions in certain employer bankruptcies in Publication 590.
taxmap/pub17/p17-091.htm#TXMP3c36dc75 |
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The contribution limit to your traditional IRA for 2008 will be increased to the smaller of the following amounts:
If you were age 50 or older before 2009, the most that can be contributed to your traditional IRA for 2008 will be the smaller of the following amounts:
For more information, see How Much Can Be Contributed? later.
If contributions on your behalf are made only to Roth IRAs, your contribution limit for 2008 will generally be the lesser of:
If you were age 50 or older before 2009 and contributions on your behalf were made only to Roth IRAs, your contribution limit for 2008 will generally be the lesser of:
However, if your modified adjusted gross income (AGI) is above a certain amount, your contribution limit may be reduced. For more information, see How Much Can Be Contributed? under Can You Contribute to a Roth IRA? later.For 2008, 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 adjusted gross income (AGI) is:
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 AGI is more than $159,000 but less than $169,000. If your AGI is $169,000 or more, you cannot take a deduction for contributions to a traditional IRA. See How Much Can You Deduct? later.
For 2008, your Roth IRA contribution limit is reduced (phased out) in the following situations.
For 2008, you can roll over amounts from an eligible retirement plan into a Roth IRA. For more information, see Rollovers from other retirement plans in chapter 2 of Publication 590.
taxmap/pub17/p17-091.htm#TXMP78cf6400 |
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If a minimum distribution is required from your IRA, the trustee, custodian, or issuer that held the IRA at the end of the preceding year must either report the amount of the required minimum distribution to you, or offer to calculate it for you. The report or offer must include the date by which the amount must be distributed. The report is due January 31 of the year in which the minimum distribution is required. It can be provided with the year-end fair market value statement that you normally get each year. No report is required for IRAs of owners who have died.
Although interest earned from your IRA is generally not taxed in the year earned, it is not tax-exempt interest. Do not report this interest on your tax return as tax-exempt interest.
If you make nondeductible contributions to a traditional IRA and you do not file Form 8606, Nondeductible IRAs, with your tax return, you may have to pay a $50 penalty.
Special rules apply to the use of retirement funds (including IRAs) by qualified individuals who suffered an economic loss as a result of Hurricane Katrina, Rita, or Wilma. While qualified hurricane distributions can no longer be made, special rules apply to the repayments of these distributions. See Hurricane-Related Relief in chapter 4 of Publication 590.
 | The term "50 or older" is used several times in this chapter. It refers to an IRA owner who is age 50 or older by the end of the tax year. |
An individual retirement arrangement (IRA) is a personal savings plan that gives you tax advantages for setting aside money for your retirement.
This chapter discusses the following topics.
Simplified Employee Pensions (SEPs) and Savings Incentive Match Plans for Employees (SIMPLEs) are not discussed in this chapter. For more information on these plans and employees' SEP IRAs and SIMPLE IRAs that are part of these plans, see Publications 560 and 590.
For information about contributions, deductions, withdrawals, transfers, rollovers, and other transactions for 2008, see Publication 590.
You may want to see:
taxmap/pub17/p17-091.htm#TXMP79cd055e |
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In this chapter the original IRA (sometimes called an ordinary or regular IRA) is referred to as a "traditional IRA." Two advantages of a traditional IRA are:
taxmap/pub17/p17-091.htm#TXMP1fdc50e6 |
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A traditional IRA is any IRA that is not a Roth IRA or a SIMPLE IRA.
taxmap/pub17/p17-091.htm#TXMP02c5504c |
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You can set up and make contributions to a traditional IRA if:
taxmap/pub17/p17-091.htm#TXMP41cb8b70 |
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Generally, compensation is what you earn from working. Compensation includes wages, salaries, tips, professional fees, bonuses, and other amounts you receive for providing personal services. 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 this purpose only if shown in box 1 of Form W-2.
Compensation also includes commissions and taxable alimony and separate maintenance payments.
taxmap/pub17/p17-091.htm#TXMP2fce7021 Self-employment income.(p116) |
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If 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:
Compensation includes earnings from self-employment even if they are not subject to self-employment tax because of your religious beliefs.
taxmap/pub17/p17-091.htm#TXMP22c88844 Nontaxable combat pay.(p116) |
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For IRA purposes, your compensation includes any nontaxable combat pay you receive.
taxmap/pub17/p17-091.htm#TXMP010faff8 |
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Compensation does not include any of the following items.
taxmap/pub17/p17-091.htm#TXMP4b2cb782 |
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You can set up a traditional IRA at any time. However, the time for making contributions for any year is limited. See When Can Contributions Be Made, later.
You can set up different kinds of IRAs with a variety of organizations. You can set up an IRA at a bank or other financial institution or with a mutual fund or life insurance company. You can also set up an IRA through your stockbroker. Any IRA must meet Internal Revenue Code requirements.
taxmap/pub17/p17-091.htm#TXMP0b7de5ab |
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Your traditional IRA can be an individual retirement account or annuity. It can be part of either a simplified employee pension (SEP) or an employer or employee association trust account.
taxmap/pub17/p17-091.htm#TXMP1629c607 |
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There are limits and other rules that affect the amount that can be contributed to a traditional IRA. These limits and other rules are explained below.
taxmap/pub17/p17-091.htm#TXMP41c49485 |
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Except as discussed later under Spousal IRA limit, each spouse figures his or her limit separately, using his or her own compensation. This is the rule even in states with community property laws.
taxmap/pub17/p17-091.htm#TXMP2c01da8e |
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Brokers' commissions paid in connection with your traditional IRA are subject to the contribution limit.
taxmap/pub17/p17-091.htm#TXMP31cf057a |
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Trustees' administrative fees are not subject to the contribution limit.
taxmap/pub17/p17-091.htm#TXMP187e9fd2 |
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If you are (or were) a member of a reserve component and you were ordered or called to active duty after September 11, 2001, you may be able to contribute (repay) to an IRA amounts equal to any qualified reservist distributions you received. You can make these repayment contributions even if they would cause your total contributions to the IRA to be more than the general limit on contributions. To be eligible to make these repayment contributions, you must have received a qualified reservist distribution from an IRA or from a section 401(k) or 403(b) plan or similar arrangement.
For more information, see Qualified reservist repayments under How Much Can Be Contributed in chapter 1 of Publication 590.
 | Contributions on your behalf to a traditional IRA reduce your limit for contributions to a Roth IRA. (See Roth IRAs, later.) |
taxmap/pub17/p17-091.htm#TXMP0cfe7a13 |
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For 2007, the most that can be contributed to your traditional IRA generally is the smaller of the following amounts.
This is the most that can be contributed regardless of whether the contributions are to one or more traditional IRAs or whether all or part of the contributions are nondeductible. (See Nondeductible Contributions, later.) Qualified reservist repayments do not affect this limit.Betty, who is 34 years old and single, earned $24,000 in 2007. Her IRA contributions for 2007 are limited to $4,000.
John, an unmarried college student working part time, earned $3,500 in 2007. His IRA contributions for 2007 are limited to $3,500, the amount of his compensation.
taxmap/pub17/p17-091.htm#TXMP1153e2bf |
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If you participated in a 401(k) plan and the employer who maintained the plan went into bankruptcy in an earlier year, you may be able to contribute an additional $3,000 to your IRA. See Publication 590 to see if you qualify to make these additional contributions. If you qualify and chose to make these catch-up contributions, the higher contribution and deduction limits for individuals who are age 50 or older do not apply. The most that you can contribute to your IRA is $7,000.
taxmap/pub17/p17-091.htm#TXMP0832a7f9 |
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For 2007, if you file a joint return and your taxable compensation is less than that of your spouse, the most that can be contributed for the year to your IRA is the smaller of the following amounts.
taxmap/pub17/p17-091.htm#TXMP31a8057a |
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As soon as you set up your traditional IRA, contributions can be made to it through your chosen sponsor (trustee or other administrator). Contributions must be in the form of money (cash, check, or money order). Property cannot be contributed.
taxmap/pub17/p17-091.htm#TXMP11bf4449 |
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Contributions can be made to your traditional IRA for a year at any time during the year or by the due date for filing your return for that year, not including extensions.
taxmap/pub17/p17-091.htm#TXMP7b8f3d69 |
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If you received nontaxable combat pay in 2004 or 2005, and the treatment of the combat pay as compensation means that you can contribute more than you already have, you can make additional contributions to an IRA for 2004 or 2005 by May 28, 2009. The contributions will be treated as having been made on the last day of the year for which they were made. If you have already filed your return for a year for which you make a contribution, you must file Form 1040X, Amended U.S. Individual Income Tax Return.
For more information, see When Can Contributions Be Made in chapter 1 of Publication 590.
taxmap/pub17/p17-091.htm#TXMP60d7581d |
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Contributions cannot be made to your traditional IRA for the year in which you reach age 701/2 or for any later year.
You attain age 701/2 on the date that is 6 calendar months after the 70th anniversary of your birth. If you were born on June 30, 1937, the 70th anniversary of your birth is June 30, 2007, and you attained age 701/2 on December 30, 2007. If you were born on July 1, 1937, the 70th anniversary of your birth was July 1, 2007, and you attained age 701/2 on January 1, 2008.
taxmap/pub17/p17-091.htm#TXMP56c37fa5 |
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If an amount is contributed to your traditional IRA between January 1 and April 15, you should tell the sponsor which year (the current year or the previous year) the contribution is for. If you do not tell the sponsor which year it is for, the sponsor can assume, and report to the IRS, that the contribution is for the current year (the year the sponsor received it).
taxmap/pub17/p17-091.htm#TXMP6b68cd96 |
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You can file your return claiming a traditional IRA contribution before the contribution is actually made. Generally, the contribution must be made by the due date of your return, not including extensions.
taxmap/pub17/p17-091.htm#TXMP322c0973 |
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You do not have to contribute to your traditional IRA for every tax year, even if you can.
taxmap/pub17/p17-091.htm#TXMP00fa2730 |
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Generally, you can deduct the lesser of:
| You may be eligible to claim a credit for contributions to your traditional IRA. For more information see chapter 37. |
taxmap/pub17/p17-091.htm#TXMP031c2527 |
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Trustees' administrative fees that are billed separately and paid in connection with your traditional IRA are not deductible as IRA contributions. However, they may be deductible as a miscellaneous itemized deduction on Schedule A (Form 1040). See chapter 28.
taxmap/pub17/p17-091.htm#TXMP02cb50c7 |
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Brokers' commissions are part of your IRA contribution and, as such, are deductible subject to the limits.
taxmap/pub17/p17-091.htm#TXMP14773353 |
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If neither you nor your spouse was covered for any part of the year by an employer retirement plan, you can take a deduction for total contributions to one or more traditional IRAs of up to the lesser of the following amounts.
taxmap/pub17/p17-091.htm#TXMP1daf2c17 Spousal IRA.(p117) |
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In the case of a married couple with unequal compensation who file a joint return, the deduction for contributions to the traditional IRA of the spouse with less compensation is limited to the lesser of the following amounts.
taxmap/pub17/p17-091.htm#TXMP51f99150 |
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If you or your spouse was covered by an employer retirement plan at any time during the year for which contributions were made, your deduction may be further limited. This is discussed later under Limit If Covered by Employer Plan. Limits on the amount you can deduct do not affect the amount that can be contributed. See Nondeductible Contributions, later.
taxmap/pub17/p17-091.htm#TXMP628c3778 |
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The Form W-2 you receive from your employer has a box used to indicate whether you were covered for the year. The "Retirement plan" box should be checked if you were covered.
Reservists and volunteer firefighters should also see Situations in Which You Are Not Covered, later.
If you are not certain whether you were covered by your employer's retirement plan, you should ask your employer.
taxmap/pub17/p17-091.htm#TXMP443d37f6 |
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For purposes of the IRA deduction, federal judges are covered by an employer retirement plan.
taxmap/pub17/p17-091.htm#TXMP1aff9ce0 |
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Special rules apply to determine the tax years for which you are covered by an employer plan. These rules differ depending on whether the plan is a defined contribution plan or a defined benefit plan.
taxmap/pub17/p17-091.htm#TXMP6a3b1586 |
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Your tax year is the annual accounting period you use to keep records and report income and expenses on your income tax return. For almost all people, the tax year is the calendar year.
taxmap/pub17/p17-091.htm#TXMP784b6223 |
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Generally, you are covered by a defined contribution plan for a tax year if amounts are contributed or allocated to your account for the plan year that ends with or within that tax year.
A defined contribution plan is a plan that provides for a separate account for each person covered by the plan. Types of defined contribution plans include profit-sharing plans, stock bonus plans, and money purchase pension plans.
taxmap/pub17/p17-091.htm#TXMP34d5b0b3 |
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If you are eligible to participate in your employer's defined benefit plan for the plan year that ends within your tax year, you are covered by the plan. This rule applies even if you:
A defined benefit plan is any plan that is not a defined contribution plan. Defined benefit plans include pension plans and annuity plans.
taxmap/pub17/p17-091.htm#TXMP57804493 |
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If you accrue a benefit for a plan year, you are covered by that plan even if you have no vested interest in (legal right to) the accrual.
taxmap/pub17/p17-091.htm#TXMP5ed54af9 |
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Unless you are covered under another employer plan, you are not covered by an employer plan if you are in one of the situations described below.
taxmap/pub17/p17-091.htm#TXMP157ed501 |
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Coverage under social security or railroad retirement is not coverage under an employer retirement plan.
taxmap/pub17/p17-091.htm#TXMP2c8aa343 |
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If you receive retirement benefits from a previous employer's plan, you are not covered by that plan.
taxmap/pub17/p17-091.htm#TXMP0a32e088 |
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If the only reason you participate in a plan is because you are a member of a reserve unit of the armed forces, you may not be covered by the plan. You are not covered by the plan if both of the following conditions are met.
taxmap/pub17/p17-091.htm#TXMP13de9698 |
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If the only reason you participate in a plan is because you are a volunteer firefighter, you may not be covered by the plan. You are not covered by the plan if both of the following conditions are met.
taxmap/pub17/p17-091.htm#TXMP182eba47 |
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If either you or your spouse was covered by an employer retirement plan, you may be entitled to only a partial (reduced) deduction or no deduction at all, depending on your income and your filing status.
Your deduction begins to decrease (phase out) when your income rises above a certain amount and is eliminated altogether when it reaches a higher amount. These amounts vary depending on your filing status.
To determine if your deduction is subject to phaseout, you must determine your modified adjusted gross income (AGI) and your filing status. See Filing status and Modified adjusted gross income (AGI), later. Then use Table 17-1 or 17-2 to determine if the phaseout applies.
taxmap/pub17/p17-091.htm#TXMP41da0a83 |
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Instead of using Table 17-1 or 17-2, use the worksheets in Appendix B of Publication 590 if, for the year, all of the following apply.
taxmap/pub17/p17-091.htm#TXMP1c871cd4 |
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If you were covered by an employer retirement plan and you did not receive any social security retirement benefits, your IRA deduction may be reduced or eliminated depending on your filing status and modified AGI as shown in Table 17-1.
| IF your filing status is... | AND your modified AGI is... | THEN you can take... | ||
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| single or head of household | $52,000 or less | a full deduction. | ||
| more than $52,000 but less than $62,000 | a partial deduction. | |||
| $62,000 or more | no deduction. | |||
| married filing jointly or qualifying widow(er) | $83,000 or less | a full deduction. | ||
| more than $83,000 but less than $103,000 | a partial deduction. | |||
| $103,000 or more | no deduction. | |||
| married filing separately2 | less than $10,000 | a partial deduction. | ||
| $10,000 or more | no deduction. |
| 1Modified AGI (adjusted gross income). See Modified adjusted gross income (AGI). |
| 2If you did not live with your spouse at any time during the year, your filing status is considered Single for this purpose (therefore, your IRA deduction is determined under the "Single" column). |
taxmap/pub17/p17-091.htm#TXMP4c63e015 If your spouse is covered.(p118) |
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If you are not covered by an employer retirement plan, but your spouse is, and you did not receive any social security benefits, your IRA deduction may be reduced or eliminated entirely depending on your filing status and modified AGI as shown in Table 17-2.
| IF your filing status is... | AND your modified AGI is... | THEN you can take... | ||
|---|---|---|---|---|
| single, head of household, or qualifying widow(er) | any amount | a full deduction. | ||
| married filing jointly or separately with a spouse who is not covered by a plan at work | any amount | a full deduction. | ||
| married filing jointly with a spouse who is covered by a plan at work | $156,000 or less | a full deduction. | ||
| more than $156,000 but less than $166,000 | a partial deduction. | |||
| $166,000 or more | no deduction. | |||
| married filing separately with a spouse who is covered by a plan at work2 | less than $10,000 | a partial deduction. | ||
| $10,000 or more | no deduction. |
| 1Modified AGI (adjusted gross income). See Modified adjusted gross income (AGI). |
| 2You are entitled to the full deduction if you did not live with your spouse at any time during the year. |
taxmap/pub17/p17-091.htm#TXMP649188b5 |
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Your filing status depends primarily on your marital status. For this purpose, you need to know if your filing status is single or head of household, married filing jointly or qualifying widow(er), or married filing separately. If you need more information on filing status, see chapter 2.
taxmap/pub17/p17-091.htm#TXMP32bd712d Lived apart from spouse.(p118) |
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If you did not live with your spouse at any time during the year and you file a separate return, your filing status, for this purpose, is single.
taxmap/pub17/p17-091.htm#TXMP5e621d0c |
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How you figure your modified AGI depends on whether you are filing Form 1040 or Form 1040A. If you made contributions to your IRA for 2007 and received a distribution from your IRA in 2007, see Publication 590.
| Do not assume that your modified AGI is the same as your compensation. Your modified AGI may include income in addition to your compensation (discussed earlier), such as interest, dividends, and income from IRA distributions. |
taxmap/pub17/p17-091.htm#TXMP4cea17b0 Form 1040.(p119) |
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If you file Form 1040, refigure the amount on the page 1 "adjusted gross income" line without taking into account any of the following amounts.
taxmap/pub17/p17-091.htm#TXMP4a53b4bd Form 1040A.(p119) |
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If you file Form 1040A, refigure the amount on the page 1 "adjusted gross income" line without taking into account any of the following amounts.
taxmap/pub17/p17-091.htm#TXMP2d162d92 Both contributions for 2007 and distributions in 2007.(p119) |
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If all three of the following apply, any IRA distributions you received in 2007 may be partly tax free and partly taxable.
If at least one of the above does not apply, figure your modified AGI using Worksheet 17-1 in this chapter.
taxmap/pub17/p17-091.htm#TXMP40bf71a0 |
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You can figure your reduced IRA deduction for either Form 1040 or Form 1040A by using the worksheets in chapter 1 of Publication 590. Also, the instructions for Form 1040 and Form 1040A include similar worksheets that you may be able to use instead.
taxmap/pub17/p17-091.htm#TXMP2d2f12bb |
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If you file Form 1040, enter your IRA deduction on line 32 of that form. If you file Form 1040A, enter your IRA deduction on line 17. You cannot deduct IRA contributions on Form 1040EZ.
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Worksheet 17-1.Figuring Your Modified AGI
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taxmap/pub17/p17-091.htm#TXMP44ceb138 |
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Although your deduction for IRA contributions may be reduced or eliminated, contributions can be made to your IRA up to the general limit or, if it applies, the spousal IRA limit. The difference between your total permitted contributions and your IRA deduction, if any, is your nondeductible contribution.
Mike is 28 years old and single. In 2007, he was covered by a retirement plan at work. His salary was $57,312. His modified AGI was $65,000. Mike made a $4,000 IRA contribution for 2007. Because he was covered by a retirement plan and his modified AGI was over $62,000, he cannot deduct his $4,000 IRA contribution. He must designate this contribution as a nondeductible contribution by reporting it on Form 8606, as explained next.
taxmap/pub17/p17-091.htm#TXMP2b3d64df |
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To designate contributions as nondeductible, you must file Form 8606.
You do not have to designate a contribution as nondeductible until you file your tax return. When you file, you can even designate otherwise deductible contributions as nondeductible.
You must file Form 8606 to report nondeductible contributions even if you do not have to file a tax return for the year.
taxmap/pub17/p17-091.htm#TXMP05ffca05 Failure to report nondeductible contributions.(p119) |
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If you do not report nondeductible contributions, all of the contributions to your traditional IRA will be treated as deductible. All distributions from your IRA will be taxed unless you can show, with satisfactory evidence, that nondeductible contributions were made.
taxmap/pub17/p17-091.htm#TXMP50adbe40 Penalty for overstatement.(p119) |
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If you overstate the amount of nondeductible contributions on your Form 8606 for any tax year, you must pay a penalty of $100 for each overstatement, unless it was due to reasonable cause.
taxmap/pub17/p17-091.htm#TXMP26d023ea Penalty for failure to file Form 8606.(p119) |
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You will have to pay a $50 penalty if you do not file a required Form 8606, unless you can prove that the failure was due to reasonable cause.
taxmap/pub17/p17-091.htm#TXMP011483e3 |
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As long as contributions are within the contribution limits, none of the earnings or gains on contributions (deductible or nondeductible) will be taxed until they are distributed. See When Can You Withdraw or Use IRA Assets, later.
taxmap/pub17/p17-091.htm#TXMP350566fe |
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You will have a cost basis in your traditional IRA if you made any nondeductible contributions. Your cost basis is the sum of the nondeductible contributions to your IRA minus any withdrawals or distributions of nondeductible contributions.
taxmap/pub17/p17-091.htm#TXMP3bee7dc4 |
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If you inherit a traditional IRA, you are called a beneficiary. A beneficiary can be any person or entity the owner chooses to receive the benefits of the IRA after he or she dies. Beneficiaries of a traditional IRA must include in their gross income any taxable distributions they receive.
taxmap/pub17/p17-091.htm#TXMP30221b3d |
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If you inherit a traditional IRA from your spouse, you generally have the following three choices.
taxmap/pub17/p17-091.htm#TXMP36e6dc0e Treating it as your own.(p120) |
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You will be considered to have chosen to treat the IRA as your own if:
However, if you receive a distribution from your deceased spouse's IRA, you can roll that distribution over into your own IRA within the 60-day time limit, as long as the distribution is not a required distribution, even if you are not the sole beneficiary of your deceased spouse's IRA.
taxmap/pub17/p17-091.htm#TXMP44f157ce |
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If you inherit a traditional IRA from anyone other than your deceased spouse, you cannot treat the inherited IRA as your own. This means that you cannot make any contributions to the IRA. It also means you cannot roll over any amounts into or out of the inherited IRA. However, you can make a trustee-to-trustee transfer as long as the IRA into which amounts are being moved is set up and maintained in the name of the deceased IRA owner for the benefit of you as beneficiary.
For more information, see the discussion of inherited IRAs under Rollover From One IRA Into Another, later.
taxmap/pub17/p17-091.htm#TXMP3dd65c32 |
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You can transfer, tax free, assets (money or property) from other retirement plans (including traditional IRAs) to a traditional IRA. You can make the following kinds of transfers.
taxmap/pub17/p17-091.htm#TXMP5071d8d9 |
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Under certain conditions, you can move assets from a traditional IRA or from a designated Roth account to a Roth IRA. See Can You Move Amounts Into a Roth IRA under Roth IRAs, later.
taxmap/pub17/p17-091.htm#TXMP1b78d21a |
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A transfer of funds in your traditional IRA from one trustee directly to another, either at your request or at the trustee's request, is not a rollover. Because there is no distribution to you, the transfer is tax free. Because it is not a rollover, it is not affected by the 1-year waiting period required between rollovers, discussed later under Rollover From One IRA Into Another. For information about direct transfers to IRAs from retirement plans other than IRAs, see Publication 590.
taxmap/pub17/p17-091.htm#TXMP0aabfe00 |
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Generally, a rollover is a tax-free distribution to you of cash or other assets from one retirement plan that you contribute (roll over) to another retirement plan. The contribution to the second retirement plan is called a "rollover contribution."
taxmap/pub17/p17-091.htm#TXMP1bcb1614 |
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You can roll over amounts from the following plans into a traditional IRA:
taxmap/pub17/p17-091.htm#TXMP1f7f94a0 |
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You cannot deduct a rollover contribution, but you must report the rollover distribution on your tax return as discussed later under Reporting rollovers from IRAs and under Reporting rollovers from employer plans.
taxmap/pub17/p17-091.htm#TXMP107a0ce6 |
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You may be able to roll over, tax free, a distribution from your traditional IRA into a qualified plan. These plans include the federal Thrift Savings Fund (for federal employees), deferred compensation plans of state or local governments (section 457 plans), and tax-sheltered annuity plans (section 403(b) plans). The part of the distribution that you can roll over is the part that would otherwise be taxable (includible in your income). Qualified plans may, but are not required to, accept such rollovers.
taxmap/pub17/p17-091.htm#TXMP20d718c9 |
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You generally must make the rollover contribution by the 60th day after the day you receive the distribution from your traditional IRA or your employer's plan.
The IRS may waive the 60-day requirement where the failure to do so would be against equity or good conscience, such as in the event of a casualty, disaster, or other event beyond your reasonable control. For more information, see Publication 590.
taxmap/pub17/p17-091.htm#TXMP69523969 Extension of rollover period.(p120) |
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If an amount distributed to you from a traditional IRA or a qualified employer retirement plan is a frozen deposit at any time during the 60-day period allowed for a rollover, special rules extend the rollover period. For more information, see Publication 590.
taxmap/pub17/p17-091.htm#TXMP4b878a51 |
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For more information on rollovers, see Publication 590.
taxmap/pub17/p17-091.htm#TXMP437aa93d |
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You can withdraw, tax free, all or part of the assets from one traditional IRA if you reinvest them within 60 days in the same or another traditional IRA. Because this is a rollover, you cannot deduct the amount that you reinvest in an IRA.
taxmap/pub17/p17-091.htm#TXMP49fbfac9 |
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Generally, if you make a tax-free rollover of any part of a distribution from a traditional IRA, you cannot, within a 1-year period, make a tax-free rollover of any later distribution from that same IRA. You also cannot make a tax-free rollover of any amount distributed, within the same 1-year period, from the IRA into which you made the tax-free rollover.
The 1-year period begins on the date you receive the IRA distribution, not on the date you roll it over into an IRA.
You have two traditional IRAs, IRA-1 and IRA-2. You make a tax-free rollover of a distribution from IRA-1 into a new traditional IRA (IRA-3). You cannot, within 1 year of the distribution from IRA-1, make a tax-free rollover of any distribution from either IRA-1 or IRA-3 into another traditional IRA.
However, the rollover from IRA-1 into IRA-3 does not prevent you from making a tax-free rollover from IRA-2 into any other traditional IRA. This is because you have not, within the last year, rolled over, tax free, any distribution from IRA-2 or made a tax-free rollover into IRA-2.
taxmap/pub17/p17-091.htm#TXMP29c7b610 Exception.(p120) |
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There is an exception to the rule that amounts rolled over tax free into an IRA cannot be rolled over tax free again within the 1-year period beginning on the date of the original distribution. The exception applies to a distribution which meets all three of the following requirements.
taxmap/pub17/p17-091.htm#TXMP3fb82007 |
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If you withdraw assets from a traditional IRA, you can roll over part of the withdrawal tax free and keep the rest of it. The amount you keep will generally be taxable (except for the part that is a return of nondeductible contributions). The amount you keep may be subject to the 10% additional tax on early distributions, discussed later under What Acts Result in Penalties or Additional Taxes.
taxmap/pub17/p17-091.htm#TXMP0957b9ed |
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Amounts that must be distributed during a particular year under the required distribution rules (discussed later) are not eligible for rollover treatment.
taxmap/pub17/p17-091.htm#TXMP74d15dbb |
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If you inherit a traditional IRA from your spouse, you generally can roll it over, or you can choose to make the inherited IRA your own. See Treating it as your own, earlier.
taxmap/pub17/p17-091.htm#TXMP6b66bcff Not inherited from spouse.(p120) |
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If you inherit a traditional IRA from someone other than your spouse, you cannot roll it over or allow it to receive a rollover contribution. You must withdraw the IRA assets within a certain period. For more information, see Publication 590.
taxmap/pub17/p17-091.htm#TXMP1f3615ef |
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Report any rollover from one traditional IRA to the same or another traditional IRA on lines 15a and 15b, Form 1040, or lines 11a and 11b, Form 1040A.
Enter the total amount of the distribution on Form 1040, line 15a, or Form 1040A, line 11a. If the total amount on Form 1040, line 15a, or Form 1040A, line 11a, was rolled over, enter zero on Form 1040, line 15b, or Form 1040A, line 11b. If the total distribution was not rolled over, enter the taxable portion of the part that was not rolled over on Form 1040, line 15b, or Form 1040A, line 11b. Put "Rollover" next to Form 1040, line 15b, or Form 1040A, line 11b. See the forms instructions.
If you rolled over the distribution in 2008 or from an IRA into a qualified plan (other than an IRA), attach a statement explaining what you did.
taxmap/pub17/p17-091.htm#TXMP35c9f7bc |
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You can roll over into a traditional IRA all or part of an eligible rollover distribution you receive from your (or your deceased spouse's):
A qualified plan is one that meets the requirements of the Internal Revenue Code.
taxmap/pub17/p17-091.htm#TXMP48f7ae64 |
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Generally, an eligible rollover distribution is any distribution of all or part of the balance to your credit in a qualified retirement plan except the following.
taxmap/pub17/p17-091.htm#TXMP0d238eba |
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A direct transfer from a deceased employee's qualified pension, profit-sharing or stock bonus plan, annuity plan, tax-sheltered annuity (section 403(b)) plan, or governmental deferred compensation (section 457) plan to an IRA set up to receive the distribution on your behalf can be treated as an eligible rollover distribution if you are the designated beneficiary of the plan and not the employee's spouse. The IRA is treated as an inherited IRA. For more information about inherited IRAs, see Inherited IRAs, earlier.
taxmap/pub17/p17-091.htm#TXMP12f7971d |
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Enter the total distribution (before income tax or other deductions were withheld) on Form 1040, line 16a, or Form 1040A, line 12a. This amount should be shown in box 1 of Form 1099-R. From this amount, subtract any contributions (usually shown in box 5 of Form 1099-R) that were taxable to you when made. From that result, subtract the amount that was rolled over either directly or within 60 days of receiving the distribution. Enter the remaining amount, even if zero, on Form 1040, line 16b, or Form 1040A, line 12b. Also, enter "Rollover" next to Form 1040, line 16b, or Form 1040A, line 12b.
taxmap/pub17/p17-091.htm#TXMP4610e87f |
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If an interest in a traditional IRA is transferred from your spouse or former spouse to you by a divorce or separate maintenance decree or a written document related to such a decree, the interest in the IRA, starting from the date of the transfer, is treated as your IRA. The transfer is tax free. For detailed information, see Publication 590.
taxmap/pub17/p17-091.htm#TXMP72c0c48d |
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You can convert amounts from a traditional IRA into a Roth IRA if, for the tax year you make the withdrawal from the traditional IRA, both of the following requirements are met.
taxmap/pub17/p17-091.htm#TXMP0b05364d |
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You cannot convert amounts that must be distributed from your traditional IRA for a particular year (including the calendar year in which you reach age 701/2) under the required distribution rules (discussed later).
taxmap/pub17/p17-091.htm#TXMP400e004d |
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If you inherited a traditional IRA from someone other than your spouse, you cannot convert it to a Roth IRA.
taxmap/pub17/p17-091.htm#TXMP307b41c9 |
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You must include in your gross income distributions from a traditional IRA that you would have had to include in income if you had not converted them into a Roth IRA. You do not include in gross income any part of a distribution from a traditional IRA that is a return of your basis, as discussed later.
If you must include any amount in your gross income, you may have to increase your withholding or make estimated tax payments. See chapter 4.
taxmap/pub17/p17-091.htm#TXMP63574b47 |
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You may be able to treat a contribution made to one type of IRA as having been made to a different type of IRA. This is called recharacterizing the contribution. More detailed information is in Publication 590.
taxmap/pub17/p17-091.htm#TXMP78621129 |
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To recharacterize a contribution, you generally must have the contribution transferred from the first IRA (the one to which it was made) to the second IRA in a trustee-to-trustee transfer. If the transfer is made by the due date (including extensions) for your tax return for the year during which the contribution was made, you can elect to treat the contribution as having been originally made to the second IRA instead of to the first IRA. If you recharacterize your contribution, you must do all three of the following.
taxmap/pub17/p17-091.htm#TXMP47db2502 |
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You cannot deduct the contribution to the first IRA. Any net income you transfer with the recharacterized contribution is treated as earned in the second IRA.
taxmap/pub17/p17-091.htm#TXMP16c239bf Required notifications.(p121) |
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To recharacterize a contribution, you must notify both the trustee of the first IRA (the one to which the contribution was actually made) and the trustee of the second IRA (the one to which the contribution is being moved) that you have elected to treat the contribution as having been made to the second IRA rather than the first. You must make the notifications by the date of the transfer. Only one notification is required if both IRAs are maintained by the same trustee. The notification(s) must include all of the following information.
taxmap/pub17/p17-091.htm#TXMP6077f804 |
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If you elect to recharacterize a contribution to one IRA as a contribution to another IRA, you must report the recharacterization on your tax return as directed by Form 8606 and its instructions. You must treat the contribution as having been made to the second IRA.
taxmap/pub17/p17-091.htm#TXMP2efc9b68 |
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There are rules limiting use of your IRA assets and distributions from it. Violation of the rules generally results in additional taxes in the year of violation. See What Acts Result in Penalties or Additional Taxes, later.
taxmap/pub17/p17-091.htm#TXMP1e9514a7 |
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If you made IRA contributions in 2007, you can withdraw them tax free by the due date of your return. If you have an extension of time to file your return, you can withdraw them tax free by the extended due date. You can do this if, for each contribution you withdraw, both of the following conditions apply.
taxmap/pub17/p17-091.htm#TXMP19ebfc68 Earnings includible in income.(p122) |
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You must include in income any earnings on the contributions you withdraw. Include the earnings in income for the year in which you made the contributions, not in the year in which you withdraw them.
| Generally, except for any part of a withdrawal that is a return of nondeductible contributions (basis), any withdrawal of your contributions after the due date (or extended due date) of your return will be treated as a taxable distribution. Excess contributions can also be recovered tax free as discussed under What Acts Result in Penalties or Additional Taxes, later. |
taxmap/pub17/p17-091.htm#TXMP6719aa40 |
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The 10% additional tax on distributions made before you reach age 591/2 does not apply to these tax-free withdrawals of your contributions. However, the distribution of interest or other income must be reported on Form 5329 and, unless the distribution qualifies as an exception to the age 591/2 rule, it will be subject to this tax.
taxmap/pub17/p17-091.htm#TXMP07579aec |
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You cannot keep funds in a traditional IRA indefinitely. Eventually they must be distributed. If there are no distributions, or if the distributions are not large enough, you may have to pay a 50% excise tax on the amount not distributed as required. See Excess Accumulations (Insufficient Distributions), later. The requirements for distributing IRA funds differ depending on whether you are the IRA owner or the beneficiary of a decedent's IRA.
taxmap/pub17/p17-091.htm#TXMP5881f421 |
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The amount that must be distributed each year is referred to as the required minimum distribution.
taxmap/pub17/p17-091.htm#TXMP388ad868 |
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Amounts that must be distributed (required minimum distributions) during a particular year are not eligible for rollover treatment.
taxmap/pub17/p17-091.htm#TXMP62fa98df |
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If you are the owner of a traditional IRA, you must start receiving distributions from your IRA by April 1 of the year following the year in which you reach age 701/2. April 1 of the year following the year in which you reach age 701/2 is referred to as the required beginning date.
taxmap/pub17/p17-091.htm#TXMP79f7ab7b |
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You must receive at least a minimum amount for each year starting with the year you reach age 701/2 (your 701/2 year). If you do not (or did not) receive that minimum amount in your 701/2 year, then you must receive distributions for your 701/2 year by April 1 of the next year.
If an IRA owner dies after reaching age 701/2, but before April 1 of the next year, no minimum distribution is required because death occurred before the required beginning date.
| Even if you begin receiving distributions before you attain age 701/2, you must begin calculating and receiving required minimum distributions by your required beginning date. |
taxmap/pub17/p17-091.htm#TXMP6c41c55c Distributions after the required beginning date.(p122) |
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The required minimum distribution for any year after the year you turn 701/2 must be made by December 31 of that later year.
taxmap/pub17/p17-091.htm#TXMP77e4f84b |
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If you are the beneficiary of a decedent's traditional IRA, the requirements for distributions from that IRA generally depend on whether the IRA owner died before or after the required beginning date for distributions.
taxmap/pub17/p17-091.htm#TXMP5fb7a314 |
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For more information, including how to figure your minimum required distribution each year and how to figure your required distribution if you are a beneficiary of a decedent's IRA, see Publication 590.
taxmap/pub17/p17-091.htm#TXMP66af408f |
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In general, distributions from a traditional IRA are taxable in the year you receive them.
taxmap/pub17/p17-091.htm#TXMP3344e569 |
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Exceptions to distributions from traditional IRAs being taxable in the year you receive them are:
| Although a conversion of a traditional IRA is considered a rollover for Roth IRA purposes, it is not an exception to the rule that distributions from a traditional IRA are taxable in the year you receive them. Conversion distributions are includible in your gross income subject to this rule and the special rules for conversions explained in Publication 590. |
taxmap/pub17/p17-091.htm#TXMP0c622509 |
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A qualified charitable distribution (QCD) is a nontaxable distribution made directly by the trustee of your IRA (other than a SEP or SIMPLE IRA) to an organization eligible to receive tax-deductible contributions. You must have been at least age 701/2 when the distribution was made. Your total QCDs for the year cannot be more than $100,000. If you file a joint return, your spouse can also have a QCD of up to $100,000. However, the amount of the QCD is limited to the amount of the distribution that would otherwise be included in income. If your IRA includes nondeductible contributions, the distribution is first considered to be paid out of otherwise taxable income. For more information see Publication 590.
| You cannot claim a charitable contribution deduction for any QCD not included in your income. |
taxmap/pub17/p17-091.htm#TXMP41d3a2fa |
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Distributions from traditional IRAs that you include in income are taxed as ordinary income.
taxmap/pub17/p17-091.htm#TXMP5addd0ef |
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In figuring your tax, you cannot use the 10-year tax option or capital gain treatment that applies to lump-sum distributions from qualified employer plans.
taxmap/pub17/p17-091.htm#TXMP4ec29c6c |
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Distributions from your traditional IRA may be fully or partly taxable, depending on whether your IRA includes any nondeductible contributions.
taxmap/pub17/p17-091.htm#TXMP6beddfa6 |
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If only deductible contributions were made to your traditional IRA (or IRAs, if you have more than one), you have no basis in your IRA. Because you have no basis in your IRA, any distributions are fully taxable when received. See Reporting taxable distributions on your return, later.
taxmap/pub17/p17-091.htm#TXMP347441f8 |
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If you made nondeductible contributions to any of your traditional IRAs, you have a cost basis (investment in the contract) equal to the amount of those contributions. These nondeductible contributions are not taxed when they are distributed to you. They are a return of your investment in your IRA.
Only the part of the distribution that represents nondeductible contributions (your cost basis) is tax free. If nondeductible contributions have been made, distributions consist partly of nondeductible contributions (basis) and partly of deductible contributions, earnings, and gains (if there are any). Until all of your basis has been distributed, each distribution is partly nontaxable and partly taxable.
taxmap/pub17/p17-091.htm#TXMP41904582 |
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You must complete Form 8606 and attach it to your return if you receive a distribution from a traditional IRA and have ever made nondeductible contributions to any of your traditional IRAs. Using the form, you will figure the nontaxable distributions for 2007 and your total IRA basis for 2007 and earlier years.
taxmap/pub17/p17-091.htm#TXMP0c21f6c3 |
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If you receive a distribution from your traditional IRA, you will receive Form 1099-R, Distributions From Pensions, Annuities, Retirement or Profit-Sharing Plans, IRAs, Insurance Contracts, etc., or a similar statement. IRA distributions are shown in boxes 1 and 2a of Form 1099-R. A number or letter code in box 7 tells you what type of distribution you received from your IRA.
taxmap/pub17/p17-091.htm#TXMP242c55a8 |
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Federal income tax is withheld from distributions from traditional IRAs unless you choose not to have tax withheld. See chapter 4.
taxmap/pub17/p17-091.htm#TXMP2478cbce IRA distributions delivered outside the United States.(p122) |
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In general, if you are a U.S. citizen or resident alien and your home address is outside the United States or its possessions, you cannot choose exemption from withholding on distributions from your traditional IRA.
taxmap/pub17/p17-091.htm#TXMP29eae5a8 |
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Report fully taxable distributions, including early distributions on Form 1040, line 15b, or Form 1040A, line 11b (no entry is required on Form 1040, line 15a, or Form 1040A, line 11a). If only part of the distribution is taxable, enter the total amount on Form 1040, line 15a, or Form 1040A, line 11a, and the taxable part on Form 1040, line 15b, or Form 1040A, line 11b. You cannot report distributions on Form 1040EZ.
taxmap/pub17/p17-091.htm#TXMP3203dfc9 |
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The tax advantages of using traditional IRAs for retirement savings can be offset by additional taxes and penalties if you do not follow the rules.
There are additions to the regular tax for using your IRA funds in prohibited transactions. There are also additional taxes for the following activities.
There are penalties for overstating the amount of nondeductible contributions and for failure to file a Form 8606, if required.
taxmap/pub17/p17-091.htm#TXMP32b0b6e5 |
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Generally, a prohibited transaction is any improper use of your traditional IRA by you, your beneficiary, or any disqualified person.
Disqualified persons include your fiduciary and members of your family (spouse, ancestor, lineal descendent, and any spouse of a lineal descendent).
The following are examples of prohibited transactions with a traditional IRA.
taxmap/pub17/p17-091.htm#TXMP2c86c14c |
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Generally, if you or your beneficiary engages in a prohibited transaction in connection with your traditional IRA account at any time during the year, the account stops being an IRA as of the first day of that year.
taxmap/pub17/p17-091.htm#TXMP1dd2629d |
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If your account stops being an IRA because you or your beneficiary engaged in a prohibited transaction, the account is treated as distributing all its assets to you at their fair market values on the first day of the year. If the total of those values is more than your basis in the IRA, you will have a taxable gain that is includible in your income. For information on figuring your gain and reporting it in income, see Are Distributions Taxable, earlier. The distribution may be subject to additional taxes or penalties.
taxmap/pub17/p17-091.htm#TXMP6f731a84 |
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If someone other than the owner or beneficiary of a traditional IRA engages in a prohibited transaction, that person may be liable for certain taxes. In general, there is a 15% tax on the amount of the prohibited transaction and a 100% additional tax if the transaction is not corrected.
taxmap/pub17/p17-091.htm#TXMP30ed3f6f |
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For more information on prohibited transactions, see Publication 590.
taxmap/pub17/p17-091.htm#TXMP490c7a3e |
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If your traditional IRA invests in collectibles, the amount invested is considered distributed to you in the year invested. You may have to pay the 10% additional tax on early distributions, discussed later.
taxmap/pub17/p17-091.htm#TXMP72e539f4 |
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These include:
taxmap/pub17/p17-091.htm#TXMP3cb58a9c Exception.(p123) |
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Your IRA can invest in one, one-half, one-quarter, or one-tenth ounce U.S. gold coins, or one-ounce silver coins minted by the Treasury Department. It can also invest in certain platinum coins and certain gold, silver, palladium, and platinum bullion.
taxmap/pub17/p17-091.htm#TXMP452143ec |
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Generally, an excess contribution is the amount contributed to your traditional IRA(s) for the year that is more than the smaller of the following amounts.
taxmap/pub17/p17-091.htm#TXMP46d6d9e6 |
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In general, if the excess contributions for a year are not withdrawn by the date your return for the year is due (including extensions), you are subject to a 6% tax. You must pay the 6% tax each year on excess amounts that remain in your traditional IRA at the end of your tax year. The tax cannot be more than 6% of the combined value of your IRAs as of the end of your tax year.
taxmap/pub17/p17-091.htm#TXMP1d0b7221 |
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You will not have to pay the 6% tax if you withdraw an excess contribution made during a tax year and you also withdraw interest or other income earned on the excess contribution. You must complete your withdrawal by the date your tax return for that year is due, including extensions.
taxmap/pub17/p17-091.htm#TXMP2649be9d How to treat withdrawn contributions.(p123) |
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Do not include in your gross income an excess contribution that you withdraw from your traditional IRA before your tax return is due if both the following conditions are met.
taxmap/pub17/p17-091.htm#TXMP297407e6 How to treat withdrawn interest or other income.(p123) |
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You must include in your gross income the interest or other income that was earned on the excess contribution. Report it on your return for the year in which the excess contribution was made. Your withdrawal of interest or other income may be subject to an additional 10% tax on early distributions, discussed later.
taxmap/pub17/p17-091.htm#TXMP6c0b8c8a |
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In general, you must include all distributions (withdrawals) from your traditional IRA in your gross income. However, if the following conditions are met, you can withdraw excess contributions from your IRA and not include the amount withdrawn in your gross income.
taxmap/pub17/p17-091.htm#TXMP74a269c4 |
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If you deducted an excess contribution in an earlier year for which the total contributions were not more than the maximum deductible amount for that year ($2,000 for 2001 and earlier years, $3,000 for 2002 through 2004 ($3,500 if you were age 50 or older), $4,000 for 2005 ($4,500 if you were age 50 or older), $4,000 for 2006 ($5,000 if you were age 50 or older)), you can still remove the excess from your traditional IRA and not include it in your gross income. To do this, file Form 1040X for that year and do not deduct the excess contribution on the amended return. Generally, you can file an amended return within 3 years after you filed your return, or 2 years from the time the tax was paid, whichever is later.
taxmap/pub17/p17-091.htm#TXMP7128eedf |
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If an excess contribution in your traditional IRA is the result of a rollover and the excess occurred because the information the plan was required to give you was incorrect, you can withdraw the excess contribution. The limits mentioned above are increased by the amount of the excess that is due to the incorrect information. You will have to amend your return for the year in which the excess occurred to correct the reporting of the rollover amounts in that year. Do not include in your gross income the part of the excess contribution caused by the incorrect information.
taxmap/pub17/p17-091.htm#TXMP518c13b7 |
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You must include early distributions of taxable amounts from your traditional IRA in your gross income. Early distributions are also subject to an additional 10% tax. See the discussion of Form 5329 under Reporting Additional Taxes, later, to figure and report the tax.
taxmap/pub17/p17-091.htm#TXMP3530da69 |
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Early distributions generally are amounts distributed from your traditional IRA account or annuity before you are age 591/2.
taxmap/pub17/p17-091.htm#TXMP062c9658 |
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Generally, if you are under age 591/2, you must pay a 10% additional tax on the distribution of any assets (money or other property) from your traditional IRA. Distributions before you are age 591/2 are called early distributions.
The 10% additional tax applies to the part of the distribution that you have to include in gross income. It is in addition to any regular income tax on that amount.
taxmap/pub17/p17-091.htm#TXMP397925a1 Exceptions.(p124) |
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There are several exceptions to the age 591/2 rule. Even if you receive a distribution before you are age 591/2, you may not have to pay the 10% additional tax if you are in one of the following situations.
taxmap/pub17/p17-091.htm#TXMP3e4e8021 Receivership distributions.(p124) |
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Early distributions (with or without your consent) from savings institutions placed in receivership are subject to this tax unless one of the exceptions listed earlier applies. This is true even if the distribution is from a receiver that is a state agency.
taxmap/pub17/p17-091.htm#TXMP69907594 |
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The additional tax on early distributions is 10% of the amount of the early distribution that you must include in your gross income. This tax is in addition to any regular income tax resulting from including the distribution in income.
taxmap/pub17/p17-091.htm#TXMP1409134b |
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The tax on early distributions does not apply to the part of a distribution that represents a return of your nondeductible contributions (basis).
taxmap/pub17/p17-091.htm#TXMP03261b07 |
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For more information on early distributions, see Publication 590.
taxmap/pub17/p17-091.htm#TXMP634636c9 |
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You cannot keep amounts in your traditional IRA indefinitely. Generally, you must begin receiving distributions by April 1 of the year following the year in which you reach age 701/2. The required minimum distribution for any year after the year in which you reach age 701/2 must be made by December 31 of that later year.
taxmap/pub17/p17-091.htm#TXMP410a832a |
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If distributions are less than the required minimum distribution for the year, you may have to pay a 50% excise tax for that year on the amount not distributed as required.
taxmap/pub17/p17-091.htm#TXMP3c92e574 |
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If the excess accumulation is due to reasonable error, and you have taken, or are taking, steps to remedy the insufficient distribution, you can request that the tax be excused. If you believe you qualify for this relief, attach a statement of explanation and complete Form 5329 as instructed under Waiver of tax in the Instructions for Form 5329.
taxmap/pub17/p17-091.htm#TXMP55cc228e |
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If you are unable to take required distributions because you have a traditional IRA invested in a contract issued by an insurance company that is in state insurer delinquency proceedings, the 50% excise tax does not apply if the conditions and requirements of Revenue Procedure 92-10 are satisfied.
taxmap/pub17/p17-091.htm#TXMP54a3151f |
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For more information on excess accumulations, see Publication 590.
taxmap/pub17/p17-091.htm#TXMP4901946f |
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Generally, you must use Form 5329 to report the tax on excess contributions, early distributions, and excess accumulations. If you must file Form 5329, you cannot use Form 1040A or Form 1040EZ.
taxmap/pub17/p17-091.htm#TXMP53d738c6 |
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If you must file an individual income tax return, complete Form 5329 and attach it to your Form 1040. Enter the total amount of additional taxes due on Form 1040, line 60.
taxmap/pub17/p17-091.htm#TXMP1a44cebb |
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If you do not have to file a tax return but do have to pay one of the additional taxes mentioned earlier, file the completed Form 5329 with the IRS at the time and place you would have filed your Form 1040. Be sure to include your address on page 1 and your signature and date on page 2. Enclose, but do not attach, a check or money order payable to the United States Treasury for the tax you owe, as shown on Form 5329. Enter your social security number and "2007 Form 5329" on your check or money order.
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You do not have to use Form 5329 if either of the following situations exist.
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