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IRA CONTRIBUTIONS The contribution limits for deductible and nondeductible IRAs are coordinated. Therefore, the maximum total yearly contribution that can be made by an individual to all IRAs is $5,000 in 2008, not counting rollover contributions. Starting in 2009, the maximum contribution is subject to an annual inflation adjustment. Contributions to traditional IRAs must be made prior to the year in which the owner of the account reaches age 70 1/2. This restriction does not apply to Roth IRAs. Individuals age 50 and over can also take advantage of the benefits of a $1,000 "catch-up" contribution.Wondering how much you can contribute tax free? The maximum deductible contribution that an individual can make to a traditional IRA is limited to the lesser of (1) 100 percent of the individual's compensation includible in gross income for the year, or If you are married, a deductible contribution can be made for each spouse as long as you and your spouse's combined compensation is at least equal to your combined contribution. This amount may be subject to reduction, however, if you or your spouse is an active participant in another qualified plan. For an individual who is not an active participant in an employer-maintained retirement plan, opening or contributing to an existing traditional IRA can mean a federal tax savings of up to $1,750 ($5,000 maximum contribution x 35%) for 2008 (based on the maximum tax bracket). California residents can save up to an additional 10% on deductible contributions. This tax savings is in addition to the taxes deferred on the income earned by such contributions during the years that the IRA is maintained. For an individual who is an active participant in an employer-maintained retirement plan, the deductibility of a contribution to a traditional IRA is linked to adjusted gross income. If your adjusted gross income exceeds a statutorily fixed level, the deductible amount of an IRA contribution is phased out over a $10,000 range. The inflation-adjusted figures for this limitation on the IRA contribution deduction are: (1) $83,000 for an active participant who is married and filing jointly; (2) $52,000 for all other taxpayers; and (3) $156,000 for a taxpayer who is not an active participant but whose spouse is. Contributions to Roth IRAs are not subject to the active participation phase-out, but are subject to income limits. The limits at which taxpayers may make contributions to Roth IRAs are significantly higher than the limits applicable to traditional IRAs. For 2008, the phase-out ranges run from $101,000 to $116,000 for single filers and $159,000 to $169,000 for joint filers. Finally, "catch-up" contributions can be made by individuals age 50 and over. In 2008 and each year thereafter, the maximum "catch-up" contribution is $1,000, in addition to the maximum $45,000 contribution limit, making the total that can be contributed by those age 50 and over $6,000. IRA Contribution Limits Chart
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