| WHO CAN CONTRIBUTE |
An individual under age 70 1/2 who has earned income from employment is qualified to contribute. Income limits determine whether the contributions are tax-deductible or non-deductible.
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Full contributions can be made by individuals who meet the following Adjusted Gross Income criteria in a tax year:  Married, filing jointly, $150,000 or less,
Single, $95,000 or less.
Partial contributions can be made up to the following phaseout ranges:
Married, filing jointly, $150,000-$160,000
Single, $95,000-$110,000.
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Parent, grandparent of designated child under age 18. Contributor must meet the following Adjusted Gross Income criteria in a tax year: Married, filing jointly, $150,000 or less,
Single, $95,000 or less.
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| TAX TREATMENT OF CONTRIBUTIONS |
Contributions are fully deductible from current taxes for:
individuals not covered under an employer sponsored retirement plan (even if a spouse is covered);
individuals who meet the following Adjusted Gross Income criteria in the 1998 tax year:
married, filing jointly, $50,000 or less (partial deduction allowed up to $60,000), or
single, $30,000 or less (partial deduction allowed up to $40,000)
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All contributions are made on an after-tax basis. No deductions are allowed from current taxes.
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All contributions are made on an after-tax basis. No deductions are allowed from current taxes.
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| DEADLINE FOR CONTRIBUTIONS |
The deadline is the tax payer's tax return due date (usually April 15), not including any extensions.
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The deadline is the tax payer's tax return due date (usually April 15), not including any extensions.
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The deadline is the tax payer's tax return due date (usually April 15), not including any extensions.
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| ANNUAL CONTRIBUTION LIMIT |
For 2005, the lesser of 100% of compensation
or $4,000; up from $3,000 for 2004. Individuals age 50 and over may contribute
an additional $500. Total annual combined contributions to Traditional and
Roth IRAs cannot exceed these limits. |
For 2005, the lesser of 100% of compensation
or $4,000; up from $3,000 for 2004. Individuals age 50 and over may contribute
an additional $500. Total annual combined contributions to Traditional and
Roth IRAs cannot exceed these limits. |
$2000 per qualified child per tax year. This can be made over and above the maximum annual contribution to traditional and Roth IRAs.
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| TAX TREATMENT OF DISTRIBUTIONS |
All non-deductible contributions are received tax-free. All earnings and deductible contributions are taxed at ordinary income tax rate when withdrawn.
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Contributions are not taxable upon withdrawal. Earnings are not taxable if the following two stipulations are met: Distribution occurs after the fifth year since first contribution was made to the Roth IRA, The distribution is made:
- after age 59 1/2
- due to death
- due to disability
- to purchase a first home.
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Distributions are not taxable if the distribution is used in the tax year to pay certain higher education expenses for the child such as:
•primary thru college
fees
books
supplies,
equipment
certain room and board expenses.
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| APPLICATION OF 10% PENALTY TAX |
A 10% premature distribution penalty applies unless the distribution is: made after 59 1/2
due to death or disability
part of a substantially equal periodic payment
to pay certain medical expenses
to pay medical insurance premiums while unemployed
to purchase a first home
to pay higher education expenses.
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A 10% premature distribution penalty applies, within the first five years, unless the distribution is: made after 59 1/2
due to death or disability
part of a substantially equal periodic payment
to pay certain medical expenses
to pay medical insurance premiums while unemployed
to purchase a first home
to pay higher education expenses.
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Distributions that exceed educational expenses for the year or made for reasons other than to pay qualified higher education expenses must be included in the child's gross income. This amount is subject to a 10% penalty tax unless the distribution is: due to the death of the child
due to the disability of the child
due to a scholarship payment received.
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