An Individual Retirement Account (IRA) is an account that gives you tax advantages for your retirement savings.
2019 Contribution Limits
For tax year 2019, IRA contributions are limited to a total of $6,000 ($7,000 if over age 50). If you have more than one IRA, your total contributions to any combination of IRAs cannot exceed this limit.
To make a $6,000 contribution you must have at least $6,000 of taxable compensation.
Traditional IRAs
One of the tax advantages of a traditional IRA is that you can deduct the amount you contribute from your taxable income. However, there are limitations on what you can deduct if you are covered by a pension plan. The IRS considers you to be covered by a pension plan as of the first date you began participating in IMRF, even if you are not vested.
2019 Traditional IRA Contribution Rules
| For single members | |
|---|---|
| If your adjusted gross income is... | You can deduct... |
| Under $64,000 |
Your entire IRA contribution |
| Over $64,000 but under $74,000 |
The amount you can deduct is based on a formula. As your adjusted gross income increases, the amount you can deduct decreases. (Refer to IRS publication 590-A) |
| Over $74,000 |
Nothing; your entire contribution is non-deductible |
| For married members who file jointly | |
|---|---|
| If your adjusted gross income is... |
You can deduct... |
| Under $103,000 |
Your entire IRA contribution |
| Over $103,000 but under $123,000 |
The amount you can deduct is based on a formula. As your adjusted gross income increases, the amount you can deduct decreases. (Refer to IRS publication 590-A) |
| Over $123,000 |
Nothing; your entire contribution is non-deductible |
| For married members who file separately | |
|---|---|
| If your adjusted gross income is... |
You can deduct... |
| Between $0 and $10,000 |
The amount you can deduct is based on a formula. As your adjusted gross income increases, the amount you can deduct decreases. (Refer to IRS publication 590-A) |
| Over $10,000 |
Nothing; your entire contribution is non-deductible |
If You Make Non-deductible Contributions
If you make non-deductible contributions to a traditional IRA, you need to complete IRS Form 8606.
This form details the deductible and non-deductible money in your IRA so you will not pay tax a second time on the portion of your withdrawal that include your non-deductible contributions. However, each withdrawal you make will include at least a proportionate amount of earnings on those contributions that will be taxable.
Roth IRAs
Contributions you make to a Roth IRA are not deductible from your taxable income. In addition:
- Earnings in the account are never taxed, if they are withdrawn after you reach age 59-1/2 and the account has been in existence for at least five years.Unlike a regular IRA, contributions can be made to a Roth IRA account after you reach age 70-1/2. However, after you reach age 70-1/2, you must have sufficient earned income to continue making contributions.
- There is no minimum withdrawal requirement for taxpayers over age 70-1/2.
- Lump sum payments (for example, separation refunds or lump sum death benefits) from IMRF contributions can be rolled over to the Roth IRA. However, for taxes this is a taxable distribution. It is treated as if the lump sum was rolled over to an IRA and then converted to a Roth IRA.
2019 Roth IRA Contribution Rules
| For single members | |
|---|---|
| If your adjusted gross income is... | You can contribute... |
| Below $122,000 |
Up to $6,000 ($7,000 if over age 50) |
| At least $123,000 but under $137,000 |
Your contribution is reduced (Refer to IRS publication 590-A) |
| $137,000 or more |
You cannot contribute to a Roth IRA |
| For married members who file jointly | |
|---|---|
| If your adjusted gross income is... |
You can contribute... |
| Below $193,000 |
Up to $6,000 ($7,000 if over age 50) |
| At least $193,00 but under $203,000 |
Your contribution is reduced (Refer to IRS publication 590-A) |
| $203,000 or more |
You cannot contribute to a Roth IRA |
| For married members who file separately | |
|---|---|
| If your adjusted gross income is... |
You can contribute... |
| $0 | Up to $5,500 ($6,500 if over age 50) |
| Between $0 and $9,999 |
Your contribution is reduced (Refer to IRS publication 590-A) |
| $10,000 or more |
You cannot contribute to a Roth IRA |
Additional Information
For additional information you can download publications from www.irs.gov, request IRS publications at 1-800-TAX-FORM (1-800-829-3676), or consult a tax advisor. An IRS publication that may be helpful is IRS Publication 590-A, "Contributions to Individual Retirement Arrangements (IRAs)"
