Q:

When should you take IRA deductions?

A:

Quick Answer

IRA tax deductions are legitimate when the individual has made contributions to the IRA during the tax year, according to Turbo Tax. However, such deductions have to meet certain conditions, and there are limits on the deductible amount depending on the individual's modified adjusted gross income.

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Full Answer

Although all IRA account holders are free to make contributions to their traditional IRAs, not all of these contributions or the full amount is necessarily tax deductible, explains Turbo Tax. Individuals who pay into an employer retirement plan and whose income exceeds a certain level often can only deduct a portion, or at times, none of these contributions. Individuals who pay into non-employee plans can deduct their contributions only if they can show earned income during the tax year.

The limit on deductible IRA contributions differs depending on the type of plan, the taxpayer's age, the amount modified, adjusted gross income reported and the specific year on which the taxes are filed, states Fidelity. These limitations often change from year to year, so taxpayers should consult IRS worksheets or their tax preparers. Partially deductible contributions are also subject to similar adjustable limits. Individuals should also consult their financial specialists to learn about the different tax regulations for Roth IRAs and traditional IRAs.

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