Macy Mark Morris, CPA

Traditional IRA qualified contributions are a deduction. Non-deductible contributions can be made to an IRA. The contributions (if originally deducted) and the income the investment generates is taxed when it is withdrawn. Contributions can be made up to April 15th of the current year for the previous year. Maximum contributions for 2005 through 2007 are $4,000. If at least 50 at the end of the year, an additional $500 in 2005 and $1,000 after 2005 can be contributed. One needs to be less than 70 1/2 during the year and have compensation equal to or greater than the contribution. A non-working spouse can make a deductible contribution. If you participate in your employers retirement plan,  deductible contributions are subject to limitations. Withdrawals before 59 1/2 are subject to penalties and tax. Medical and education expenses paid with early withdrawals may be exempt from penalties. $10,000 can be withdrawn penalty free for a first time home purchase. This is a general description, your specific circumstances may limit your eligibility.

 

Roth IRA contributions are not deductible. Qualified withdrawals from a Roth IRA are tax free including all the earnings. Roth IRA contributions made child could generate a large retirement fund after years of compounding. The child would need taxable earnings to qualify. Generally a qualified withdrawal can be made after a five year holding period and you are 59 1/2, a beneficiary of the deceased Roth IRAs owner, disabled or for a first time home purchase. Contributions can be made up to April 15th of the current year for the previous year. Maximum contributions for 2005 through 2007 are $4,000. If at least 50 at the end of the year, an additional $500 in 2005 and $1,000 after 2005 can be contributed. One must have income equal to or greater than the contribution and income less than the maximum limitations. The allowed contributions phase out when modified adjust income for single individual between $95,000 to $110,000, joint $150,000 to $160,000 and married separate $0 to $10,000.