Contribution Limits for Tax Season 2012 (Traditional IRA and Roth IRA)

You should not miss the opportunity to make the most out of your contributions to an IRA especially when the Tax Season is just around the corner. As you must be aware that contribution limits to your IRA keep on changing every year, so to take full advantage of your retirement savings you should stay up-to-date with any such alterations. The reason why IRA limits are reviewed annually is quite simple; the fluctuation in cost-of-living index makes it necessary to make adjustments to your retirement plans. Read on to find more about revised contribution and deduction limits (2012) on your Roth IRAs and Traditional IRAs.

Any changes to Internal Revenue Code can impact the performance of your IRA, no-matter if you are a part-time job holder, an unemployed spouse, feeling secure with a permanent job or running some small business venture. Securing your future with an IRA is an ideal way to ride on tax breaks. If you don’t have an IRA yet, better start it before this tax season ends April 18^th. I can bet, you won’t be able to resist once you start comparing new IRA account opening deals from some of the leading brokerages around.

Now, let’s not delay any further and immediately start digging into details of applicable contribution limits (2012) on your Traditional IRAs and Roth IRAs.

Current Contribution Limit for Traditional IRA

Unchanged from where it stood last year, the current contribution limits for Traditional IRA are as follows

Age fifty and above: – Equal to taxable income to a maximum of $6000

Age below fifty: – Equal to taxable income to a maximum of $5000

Older people get the advantage of making higher contributions, so even if you are above fifty you can still save a lot on your taxes.

Tax Deductable Contribution on your Traditional IRA

Individuals and Couples who do not make contributions in retirement plans offered by their employer get 100% tax deductions on their contributions to a traditional IRA.

If you are participating in a retirement program at work, then your deductable IRA contributions will be reduced as per your tax filing status and your income.

2012 Traditional IRA Deductible Contribution Limits

Those who are covered by a retirement plan at work can use this table to determine if their modified AGI affects the amount of their deduction.

If Your Filing Status Is	And Your Modified AGI Is	Then
Single, OR head of household	$58,000 or less	You get full deduction (To the amount of your contribution limit)
	more than $58,000 but less than $68,000	You get a partial deduction.
	$68,000 or more	You get no deduction.
You are Married filing jointly, OR a Qualifying widow(er)	$92,000 or less	You get a full deduction (To the amount of your contribution limit)
	more than $92,000 but less than $112,000	You get a partial deduction.
	$112,000 or more	You get no deduction.
You are married and filing separately	less than $10,000	You get a partial deduction .
You are married and filing separately	$10,000 or more	You get no deduction.
Those who file separately and did not live with their spouse at any time during the year, their IRA deduction is determined under the “single” filing status.

Data Source: http://www.irs.gov/retirement/participant/article/0,,id=188235,00.html

Those who are not covered by a retirement plan at work can use this table to determine if their modified AGI affects the amount of your deduction.

If Your Filing Status Is	And Your Modified AGI Is	Then
Single, OR head of household, OR qualifying widow(er)	any amount	You get a full deduction (To the amount of your contribution)
You are Married and filing jointly or separately with a spouse ( Who is not contributing in a plan at work)	any amount	You get a full deduction (To the amount of your contribution)
You are Married and filing jointly with a spouse (who is contributing in a plan at work)	$173,000 or less	a full deduction up to the amount of your contribution.
	more than $173,000 but less than $183,000	You get a partial deduction.
	$183,000 or more	You get no deduction.
You are Married and filing separately with a spouse (who is contributing in a plan at work)	less than $10,000	You get a partial deduction.
	$10,000 or more	You get no deduction.
Those who are filing separately and did not live with their spouse at any time during the year, their IRA deduction is determined under the “single” filing status.

Data Source:- http://www.irs.gov/retirement/participant/article/0,,id=188237,00.html

Current Contribution Limit for Roth IRA

For the year 2012, the contribution limit for Roth IRA stands same as for Traditional IRA. However, you should be aware that you can split your contributions between both of these instruments and avail tax benefits within the total limit.

You can use the following table to check if your contribution to a Roth IRA is altered by the amount of your modified AGI.

If You Have Taxable Compensation and Your Filing Status Is	And Your Modified AGI Is	Then
You are Married and filing jointly or as qualifying widow(er)	Less than $173,000	You can avail the maximum contribution limit
	at least $173,000 but less than $183,000	Contribution limit will get reduced
	$183,000 or more	You are not allowed to contribute to a Roth IRA.
You are Married and filing separately ( Have lived with your spouse during the year )	zero (-0-)	You can avail the maximum contribution limit
	more than zero (-0-) but less than $10,000	Contribution limit will get reduced
	$10,000 or more	You are not allowed to contribute to a Roth IRA.
If Single, OR head of household, OR married filing separately ( not lived with your spouse during the year)	less than $110,000	You can avail the maximum contribution limit
	at least $110,000 but less than $125,000	Contribution limit will get reduced
	$125,000 or more	You are not allowed to contribute to a Roth IRA.