| Individuals under
age 70 ½ who has income from compensation (or who is filing jointly with
a spouse who earns compensation).
Anyone receiving a distribution from a qualified retirement plan and decides to
roll over the proceeds of the plan into an IRA.
|
$4000.00 may be
contributed during the years 2005 - 2007
For owners age
50 and older, limits increase to $4500.00 for 2005 and $5000.00 for years 2006
and 2007.
Contributions cannot
exceed compensation
Contributions to
a traditional IRA reduces the amount of contributions that may be made to a Roth
IRA.
|
Fully deductible
contributions:
• Single individuals
not active in employer retirement plans
• Single individuals
active in employer retirement plans with MAGI* of less than $50,000 (2005-2010)
• Married couples with neither spouse active in an employer retirement plan.
• Married individuals
active in an employer retirement plan with joint tax return showing an AGI of
less than:
$70,000 - 2005
$75,000 - 2006
$80,000 - 2007
• Married individuals not active in employer retirement plans with spouses
who are, as long as MAGI is $150,000 or less.
|
Earnings grow
tax-deferred until withdrawn.
Contributions may
be tax-deductible
|
Withdraw penalty
free for any of the following reasons:
• Qualified
higher-education expenses
• First-time home purchase**
• Age 59 ½
•Disability
• Qualifying medical expenses exceeding 7.5% of adjusted gross income
• Payment to beneficiaries upon owner's death
• Payment of health insurance premiums while unemployed for 12 weeks or longer
|
| Anyone who has
income from compensation (or who is filing jointly with a spouse who earns compensation),
with the following MAGI*
• Up to $95,000
for single filers
• Up to $150,000 for joint filers
Reduced contributions
allowed for higher incomes:
• Up to $110,000
for single filers
• Up to $160,000 for joint filers
|
$4,000 for 2005
- 2007
For owner age 50
and older, your limits increase to $4,500 for 2005 and $5,000 for 2006 and 2007
• Cannot exceed
compensation
• Reduces contributions that can be made to traditional IRAs
|
No one can deduct
contributions |
Earnings are tax-free
if account is open for five tax years and withdrawn for a qualified reason (age
59 ½, disability, death or a first-time home purchase**)
• Not required to start withdrawals at age 70 ½.
|
• Regular
contributions can be withdrawn tax-free and penalty-free at any time
• After the account has been open five tax years, earnings can be withdrawn
tax-free and penalty-free for any of these reasons: age 59 ½, disability,
death or a first-time home purchase**
|
Anyone who has
MAGI:
• Up to $95,000 for single filers
• Up to $190,000 for joint filers
• Some people with higher MAGI may be able to make smaller contributions
• Contributions not allowed after the beneficiary reaches age 18 (except
for special needs beneficiaries)
|
• $2,000
per child year year
• Limit applies to all Coverdell Education Savings Accounts (ESA) for the
same child
|
No one can deduct
contributions
|
• Withdrawals
for certain qualified education expenses are tax-free
• Qualified education expenses include tuition, fees, books, computer equipment
and technology required for elementary, secondary and post-secondary education
• A beneficiary may receive tax-free distributions from a Coverdell ESA in
the same year he or she claims the Lifetime Learning or HOPE Scholarship tax credits
|
• Withdrawals
are tax-free and penalty -free only for qualified education expenses (earnings
are subject to tax and penalty for most other withdrawals)
• Funds can be transferred from one child's account to an account for another
child in the family
|
