Traditional IRA Eligibility Limits
You may contribute earned income to a traditional Individual Retirement Account until the year you turn 70 1/2, at which point you are ineligible. However, Internal Revenue Service rules prevent some high earners from deducting their contribution.
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Function
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The IRS publishes annual income limits that may lessen or eliminate your eligibility to deduct your traditional IRA contribution. The limits only apply if you participate in an employer-sponsored retirement plan through work.
Features
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In 2010, you may contribute up to $5,000 to a traditional IRA if you are younger than 50. So-called "catch-up limits" raise the cap for those 50 and older--as of 2010, the catch-up limit is $6,000.
If you are married, filing jointly, you may deduct the maximum contribution if you make up to $89,000. If you make between $89,001 and $109,000, you can deduct a percentage of the maximum. If you make over $109,000, you are ineligible to deduct a traditional IRA contribution. There are different income limits for single filers and spouses who file separately.
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Considerations
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If you income is in excess of the deduction limit, you may still contribute the maximum limit to a traditional IRA. Assets you place in a traditional IRA are tax deferred, so you can accumulate earnings and let them compound throughout the life of the IRA.
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