Contributing to Your IRA
The most that you can contribute to your retirement IRA for
2014 (and 2015) is the smaller of $5,500 or an amount equal to your
compensation includible in income for the year. Also, if you are at
least age 50 during the year you can make an additional $1,000 "catch-up"
contribution, increasing your allowable contribution limits to $6,500
for 2014 (and 2015).
These contribution limits apply if you
have more than one IRA, or more than one type of IRA. The contribution
must be from "compensation," which means wages, salaries, commissions,
net self-employment income, and other sources of earned income. It
does not include deferred compensation, retirement payments, or portfolio
income such as interest or dividends. When both a husband and wife
have compensation, the limit applies separately to each, so that for
2014 (and 2015) as much as $11,000 can be contributed ($13,000 if
they are both at least 50 years of age).
If one spouse does
not work or has very little income, a married couple filing jointly
may still contribute up to $5,500 for each spouse's account (or $6,500
if at least age 50), as long as the couple's joint earned income exceeds
their joint IRA contributions. Separate accounts must be used for
each spouse.
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Work Smart An IRA can be established, and/or
a contribution made, after year-end. It must be made no later than
the due date for filing the income tax return for that year, not including
extensions. This generally means that you have until April 15th of
the following year to make the contribution, and to deduct it on your
tax return if you qualify for the deduction. You don't have
to contribute the full amount every year. You may skip a year or even
several years. You may resume making contributions in a later year,
but you cannot "catch up" for years no contribution was made. If
you contribute more than the allowable amount, a 6 percent excise
tax penalty will be assessed. This penalty is due for the year of
the excess contribution and for each year thereafter until corrected.
However, you can generally avoid this tax by removing any excess
contributions by the due date of the return for the tax year for which
they were made. No contributions may be made to: (1) an inherited
IRA, (2) in a form other than cash, or (3) during or after the year
in which the individual reaches age 70-1/2. |
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