IRA Rules - Are You Eligible For IRA
One of the best retirement and tax planning schemes available to people in the United States is the Individual Retirement Account (IRA). You must be aware of the IRA rules of eligibility if you want to get an IRA for yourself. Understanding the eligibility criteria for IRA is so complex that it puts off a lot of people from getting an IRA account in the first place. First of all you need to have in hand cash to make IRA contributions. Remember that if your savings are in the form of stocks or some other capital assets, they will not be accepted as IRA contributions. Contributions are accepted only in terms of cash.
Secondly, you must look into the fact that you must have received 'compensation' (salary) during the last year. IRA contributions must be made from the compensation funds you received. If your employer has a company sponsored IRA scheme, you will have to check with your HR department. Next IRA rule of eligibility that you would have to check is whether you have had an active participation in any other employer sponsored IRA plan last year. If you have not been a part of one, then you are eligible outright. If the answer is yes, then even in that case you might still be eligible. The decision has to be made depending your tax filing status as well as the money that you have earned. The entire concept basically comes to the amount quoted as your Modified Adjusted Gross Income (MAGI). If you want to go for a Roth IRA scheme, and you are filing income tax alone, your MAGI must not be above $99,000 in order to make a full contribution. In case you are filing the tax returns jointly with a spouse and either of you is already participating in a qualified plan, the MAGI restrictions go up. Here the people with a MAGI of $156,000 can make full contributions and people with a MAGI of below $166,000 can make partial contribution. In this case also the IRA rules say that people with MAGI above $166, 000 are ineligible for getting an IRA. For those filing a joint return but getting lesser money as compared to their spouse, the IRA rules declare that they are eligible to make contributions. This was originally meant for allowing people who did not work to participate in IRA. The IRA rules allow a maximum contribution depending upon the age factor as well. While the IRA rules may differ in details depending upon the type of IRA, the broad areas of focus remain the same. |