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Free file gov 1. Free file gov   Traditional IRAs Table of Contents What's New for 2013 What's New for 2014 Introduction Who Can Open a Traditional IRA?What Is Compensation? When Can a Traditional IRA Be Opened? How Can a Traditional IRA Be Opened?Individual Retirement Account Individual Retirement Annuity Individual Retirement Bonds Simplified Employee Pension (SEP) Employer and Employee Association Trust Accounts Required Disclosures How Much Can Be Contributed?Limit. Free file gov When repayment contributions can be made. Free file gov No deduction. Free file gov Reserve component. Free file gov Figuring your IRA deduction. Free file gov Reporting the repayment. Free file gov Example. Free file gov General Limit Kay Bailey Hutchison Spousal IRA Limit Filing Status Less Than Maximum Contributions More Than Maximum Contributions When Can Contributions Be Made? How Much Can You Deduct?Kay Bailey Hutchison Spousal IRA. Free file gov Are You Covered by an Employer Plan? Limit if Covered by Employer Plan Reporting Deductible Contributions Nondeductible Contributions Examples — Worksheet for Reduced IRA Deduction for 2013 What if You Inherit an IRA?Treating it as your own. Free file gov Can You Move Retirement Plan Assets?Transfers to Roth IRAs from other retirement plans. Free file gov Trustee-to-Trustee Transfer Rollovers Transfers Incident To Divorce Converting From Any Traditional IRA Into a Roth IRA Recharacterizations When Can You Withdraw or Use Assets?Contributions Returned Before Due Date of Return When Must You Withdraw Assets? (Required Minimum Distributions)IRA Owners IRA Beneficiaries Which Table Do You Use To Determine Your Required Minimum Distribution? What Age(s) Do You Use With the Table(s)? Miscellaneous Rules for Required Minimum Distributions Are Distributions Taxable?January 2013 QCDs treated as made in 2012. Free file gov 2013 Reporting. Free file gov Additional reporting requirements if you made the election to treat a January 2013 QCD as made in 2012. Free file gov One-time transfer. Free file gov Testing period rules apply. Free file gov More information. Free file gov Distributions Fully or Partly Taxable Figuring the Nontaxable and Taxable Amounts Recognizing Losses on Traditional IRA Investments Other Special IRA Distribution Situations Reporting and Withholding Requirements for Taxable Amounts What Acts Result in Penalties or Additional Taxes?Prohibited Transactions Investment in Collectibles Excess Contributions Early Distributions Excess Accumulations (Insufficient Distributions) Reporting Additional Taxes What's New for 2013 Traditional IRA contribution and deduction limit. Free file gov  The contribution limit to your traditional IRA for 2013 will be increased to the smaller of the following amounts: $5,500, or Your taxable compensation for the year. Free file gov If you were age 50 or older before 2014, the most that can be contributed to your traditional IRA for 2013 will be the smaller of the following amounts: $6,500, or Your taxable compensation for the year. Free file gov For more information, see How Much Can Be Contributed? in this chapter. Free file gov Modified AGI limit for traditional IRA contributions increased. Free file gov  For 2013, if you were covered by a retirement plan at work, your deduction for contributions to a traditional IRA is reduced (phased out) if your modified AGI is: More than $95,000 but less than $115,000 for a married couple filing a joint return or a qualifying widow(er), More than $59,000 but less than $69,000 for a single individual or head of household, or Less than $10,000 for a married individual filing a separate return. Free file gov If you either lived with your spouse or file a joint return, and your spouse was covered by a retirement plan at work, but you were not, your deduction is phased out if your modified AGI is more than $178,000 but less than $188,000. Free file gov If your modified AGI is $188,000 or more, you cannot take a deduction for contributions to a traditional IRA. Free file gov See How Much Can You Deduct? in this chapter. Free file gov Net Investment Income Tax. Free file gov  For purposes of the Net Investment Income Tax (NIIT), net investment income does not include distributions from a qualified retirement plan (for example, 401(a), 403(a), 403(b), 457(b) plans, and IRAs). Free file gov However, these distributions are taken into account when determining the modified adjusted gross income threshold. Free file gov Distributions from a nonqualified retirement plan are included in net investment income. Free file gov See Form 8960, Net Investment Income Tax—Individuals, Estates, and Trusts, and its instructions for more information. Free file gov What's New for 2014 Modified AGI limit for traditional IRA contributions increased. Free file gov  For 2014, if you are covered by a retirement plan at work, your deduction for contributions to a traditional IRA is reduced (phased out) if your modified AGI is: More than $96,000 but less than $116,000 for a married couple filing a joint return or a qualifying widow(er), More than $60,000 but less than $70,000 for a single individual or head of household, or Less than $10,000 for a married individual filing a separate return. Free file gov If you either live with your spouse or file a joint return, and your spouse is covered by a retirement plan at work, but you are not, your deduction is phased out if your modified AGI is more than $181,000 but less than $191,000. Free file gov If your modified AGI is $191,000 or more, you cannot take a deduction for contributions to a traditional IRA. Free file gov Introduction This chapter discusses the original IRA. Free file gov In this publication the original IRA (sometimes called an ordinary or regular IRA) is referred to as a “traditional IRA. Free file gov ” A traditional IRA is any IRA that is not a Roth IRA or a SIMPLE IRA. Free file gov The following are two advantages of a traditional IRA: You may be able to deduct some or all of your contributions to it, depending on your circumstances. Free file gov Generally, amounts in your IRA, including earnings and gains, are not taxed until they are distributed. Free file gov Who Can Open a Traditional IRA? You can open and make contributions to a traditional IRA if: You (or, if you file a joint return, your spouse) received taxable compensation during the year, and You were not age 70½ by the end of the year. Free file gov You can have a traditional IRA whether or not you are covered by any other retirement plan. Free file gov However, you may not be able to deduct all of your contributions if you or your spouse is covered by an employer retirement plan. Free file gov See How Much Can You Deduct , later. Free file gov Both spouses have compensation. Free file gov   If both you and your spouse have compensation and are under age 70½, each of you can open an IRA. Free file gov You cannot both participate in the same IRA. Free file gov If you file a joint return, only one of you needs to have compensation. Free file gov What Is Compensation? Generally, compensation is what you earn from working. Free file gov For a summary of what compensation does and does not include, see Table 1-1. Free file gov Compensation includes all of the items discussed next (even if you have more than one type). Free file gov Wages, salaries, etc. Free file gov   Wages, salaries, tips, professional fees, bonuses, and other amounts you receive for providing personal services are compensation. Free file gov The IRS treats as compensation any amount properly shown in box 1 (Wages, tips, other compensation) of Form W-2, Wage and Tax Statement, provided that amount is reduced by any amount properly shown in box 11 (Nonqualified plans). Free file gov Scholarship and fellowship payments are compensation for IRA purposes only if shown in box 1 of Form W-2. Free file gov Commissions. Free file gov   An amount you receive that is a percentage of profits or sales price is compensation. Free file gov Self-employment income. Free file gov   If you are self-employed (a sole proprietor or a partner), compensation is the net earnings from your trade or business (provided your personal services are a material income-producing factor) reduced by the total of: The deduction for contributions made on your behalf to retirement plans, and The deduction allowed for the deductible part of your self-employment taxes. Free file gov   Compensation includes earnings from self-employment even if they are not subject to self-employment tax because of your religious beliefs. Free file gov Self-employment loss. Free file gov   If you have a net loss from self-employment, do not subtract the loss from your salaries or wages when figuring your total compensation. Free file gov Alimony and separate maintenance. Free file gov   For IRA purposes, compensation includes any taxable alimony and separate maintenance payments you receive under a decree of divorce or separate maintenance. Free file gov Nontaxable combat pay. Free file gov   If you were a member of the U. Free file gov S. Free file gov Armed Forces, compensation includes any nontaxable combat pay you received. Free file gov This amount should be reported in box 12 of your 2013 Form W-2 with code Q. Free file gov Table 1-1. Free file gov Compensation for Purposes of an IRA Includes . Free file gov . Free file gov . Free file gov Does not include . Free file gov . Free file gov . Free file gov   earnings and profits from property. Free file gov wages, salaries, etc. Free file gov     interest and dividend income. Free file gov commissions. Free file gov     pension or annuity income. Free file gov self-employment income. Free file gov     deferred compensation. Free file gov alimony and separate maintenance. Free file gov     income from certain  partnerships. Free file gov nontaxable combat pay. Free file gov     any amounts you exclude from income. Free file gov     What Is Not Compensation? Compensation does not include any of the following items. Free file gov Earnings and profits from property, such as rental income, interest income, and dividend income. Free file gov Pension or annuity income. Free file gov Deferred compensation received (compensation payments postponed from a past year). Free file gov Income from a partnership for which you do not provide services that are a material income-producing factor. Free file gov Conservation Reserve Program (CRP) payments reported on Schedule SE (Form 1040), line 1b. Free file gov Any amounts (other than combat pay) you exclude from income, such as foreign earned income and housing costs. Free file gov When Can a Traditional IRA Be Opened? You can open a traditional IRA at any time. Free file gov However, the time for making contributions for any year is limited. Free file gov See When Can Contributions Be Made , later. Free file gov How Can a Traditional IRA Be Opened? You can open different kinds of IRAs with a variety of organizations. Free file gov You can open an IRA at a bank or other financial institution or with a mutual fund or life insurance company. Free file gov You can also open an IRA through your stockbroker. Free file gov Any IRA must meet Internal Revenue Code requirements. Free file gov The requirements for the various arrangements are discussed below. Free file gov Kinds of traditional IRAs. Free file gov   Your traditional IRA can be an individual retirement account or annuity. Free file gov It can be part of either a simplified employee pension (SEP) or an employer or employee association trust account. Free file gov Individual Retirement Account An individual retirement account is a trust or custodial account set up in the United States for the exclusive benefit of you or your beneficiaries. Free file gov The account is created by a written document. Free file gov The document must show that the account meets all of the following requirements. Free file gov The trustee or custodian must be a bank, a federally insured credit union, a savings and loan association, or an entity approved by the IRS to act as trustee or custodian. Free file gov The trustee or custodian generally cannot accept contributions of more than the deductible amount for the year. Free file gov However, rollover contributions and employer contributions to a simplified employee pension (SEP) can be more than this amount. Free file gov Contributions, except for rollover contributions, must be in cash. Free file gov See Rollovers , later. Free file gov You must have a nonforfeitable right to the amount at all times. Free file gov Money in your account cannot be used to buy a life insurance policy. Free file gov Assets in your account cannot be combined with other property, except in a common trust fund or common investment fund. Free file gov You must start receiving distributions by April 1 of the year following the year in which you reach age 70½. Free file gov See When Must You Withdraw Assets? (Required Minimum Distributions) , later. Free file gov Individual Retirement Annuity You can open an individual retirement annuity by purchasing an annuity contract or an endowment contract from a life insurance company. Free file gov An individual retirement annuity must be issued in your name as the owner, and either you or your beneficiaries who survive you are the only ones who can receive the benefits or payments. Free file gov An individual retirement annuity must meet all the following requirements. Free file gov Your entire interest in the contract must be nonforfeitable. Free file gov The contract must provide that you cannot transfer any portion of it to any person other than the issuer. Free file gov There must be flexible premiums so that if your compensation changes, your payment can also change. Free file gov This provision applies to contracts issued after November 6, 1978. Free file gov The contract must provide that contributions cannot be more than the deductible amount for an IRA for the year, and that you must use any refunded premiums to pay for future premiums or to buy more benefits before the end of the calendar year after the year in which you receive the refund. Free file gov Distributions must begin by April 1 of the year following the year in which you reach age 70½. Free file gov See When Must You Withdraw Assets? (Required Minimum Distributions) , later. Free file gov Individual Retirement Bonds The sale of individual retirement bonds issued by the federal government was suspended after April 30, 1982. Free file gov The bonds have the following features. Free file gov They stop earning interest when you reach age 70½. Free file gov If you die, interest will stop 5 years after your death, or on the date you would have reached age 70½, whichever is earlier. Free file gov You cannot transfer the bonds. Free file gov If you cash (redeem) the bonds before the year in which you reach age 59½, you may be subject to a 10% additional tax. Free file gov See Age 59½ Rule under Early Distributions, later. Free file gov You can roll over redemption proceeds into IRAs. Free file gov Simplified Employee Pension (SEP) A simplified employee pension (SEP) is a written arrangement that allows your employer to make deductible contributions to a traditional IRA (a SEP IRA) set up for you to receive such contributions. Free file gov Generally, distributions from SEP IRAs are subject to the withdrawal and tax rules that apply to traditional IRAs. Free file gov See Publication 560 for more information about SEPs. Free file gov Employer and Employee Association Trust Accounts Your employer or your labor union or other employee association can set up a trust to provide individual retirement accounts for employees or members. Free file gov The requirements for individual retirement accounts apply to these traditional IRAs. Free file gov Required Disclosures The trustee or issuer (sometimes called the sponsor) of your traditional IRA generally must give you a disclosure statement at least 7 days before you open your IRA. Free file gov However, the sponsor does not have to give you the statement until the date you open (or purchase, if earlier) your IRA, provided you are given at least 7 days from that date to revoke the IRA. Free file gov The disclosure statement must explain certain items in plain language. Free file gov For example, the statement should explain when and how you can revoke the IRA, and include the name, address, and telephone number of the person to receive the notice of cancellation. Free file gov This explanation must appear at the beginning of the disclosure statement. Free file gov If you revoke your IRA within the revocation period, the sponsor must return to you the entire amount you paid. Free file gov The sponsor must report on the appropriate IRS forms both your contribution to the IRA (unless it was made by a trustee-to-trustee transfer) and the amount returned to you. Free file gov These requirements apply to all sponsors. Free file gov How Much Can Be Contributed? There are limits and other rules that affect the amount that can be contributed to a traditional IRA. Free file gov These limits and rules are explained below. Free file gov Community property laws. Free file gov   Except as discussed later under Kay Bailey Hutchison Spousal IRA Limit , each spouse figures his or her limit separately, using his or her own compensation. Free file gov This is the rule even in states with community property laws. Free file gov Brokers' commissions. Free file gov   Brokers' commissions paid in connection with your traditional IRA are subject to the contribution limit. Free file gov For information about whether you can deduct brokers' commissions, see Brokers' commissions , later, under How Much Can You Deduct. Free file gov Trustees' fees. Free file gov   Trustees' administrative fees are not subject to the contribution limit. Free file gov For information about whether you can deduct trustees' fees, see Trustees' fees , later, under How Much Can You Deduct. Free file gov Qualified reservist repayments. Free file gov   If you were a member of a reserve component and you were ordered or called to active duty after September 11, 2001, you may be able to contribute (repay) to an IRA amounts equal to any qualified reservist distributions (defined later under Early Distributions) you received. Free file gov You can make these repayment contributions even if they would cause your total contributions to the IRA to be more than the general limit on contributions. Free file gov To be eligible to make these repayment contributions, you must have received a qualified reservist distribution from an IRA or from a section 401(k) or 403(b) plan or a similar arrangement. Free file gov Limit. Free file gov   Your qualified reservist repayments cannot be more than your qualified reservist distributions, explained under Early Distributions , later. Free file gov When repayment contributions can be made. Free file gov   You cannot make these repayment contributions later than the date that is 2 years after your active duty period ends. Free file gov No deduction. Free file gov   You cannot deduct qualified reservist repayments. Free file gov Reserve component. Free file gov   The term “reserve component” means the: Army National Guard of the United States, Army Reserve, Naval Reserve, Marine Corps Reserve, Air National Guard of the United States, Air Force Reserve, Coast Guard Reserve, or Reserve Corps of the Public Health Service. Free file gov Figuring your IRA deduction. Free file gov   The repayment of qualified reservist distributions does not affect the amount you can deduct as an IRA contribution. Free file gov Reporting the repayment. Free file gov   If you repay a qualified reservist distribution, include the amount of the repayment with nondeductible contributions on line 1 of Form 8606. Free file gov Example. Free file gov   In 2013, your IRA contribution limit is $5,500. Free file gov However, because of your filing status and AGI, the limit on the amount you can deduct is $3,500. Free file gov You can make a nondeductible contribution of $2,000 ($5,500 - $3,500). Free file gov In an earlier year you received a $3,000 qualified reservist distribution, which you would like to repay this year. Free file gov   For 2013, you can contribute a total of $8,500 to your IRA. Free file gov This is made up of the maximum deductible contribution of $3,500; a nondeductible contribution of $2,000; and a $3,000 qualified reservist repayment. Free file gov You contribute the maximum allowable for the year. Free file gov Since you are making a nondeductible contribution ($2,000) and a qualified reservist repayment ($3,000), you must file Form 8606 with your return and include $5,000 ($2,000 + $3,000) on line 1 of Form 8606. Free file gov The qualified reservist repayment is not deductible. Free file gov Contributions on your behalf to a traditional IRA reduce your limit for contributions to a Roth IRA. Free file gov See chapter 2 for information about Roth IRAs. Free file gov General Limit For 2013, the most that can be contributed to your traditional IRA generally is the smaller of the following amounts: $5,500 ($6,500 if you are age 50 or older), or Your taxable compensation (defined earlier) for the year. Free file gov Note. Free file gov This limit is reduced by any contributions to a section 501(c)(18) plan (generally, a pension plan created before June 25, 1959, that is funded entirely by employee contributions). Free file gov This is the most that can be contributed regardless of whether the contributions are to one or more traditional IRAs or whether all or part of the contributions are nondeductible. Free file gov (See Nondeductible Contributions , later. Free file gov ) Qualified reservist repayments do not affect this limit. Free file gov Examples. Free file gov George, who is 34 years old and single, earns $24,000 in 2013. Free file gov His IRA contributions for 2013 are limited to $5,500. Free file gov Danny, an unmarried college student working part time, earns $3,500 in 2013. Free file gov His IRA contributions for 2013 are limited to $3,500, the amount of his compensation. Free file gov More than one IRA. Free file gov   If you have more than one IRA, the limit applies to the total contributions made on your behalf to all your traditional IRAs for the year. Free file gov Annuity or endowment contracts. Free file gov   If you invest in an annuity or endowment contract under an individual retirement annuity, no more than $5,500 ($6,500 if you are age 50 or older) can be contributed toward its cost for the tax year, including the cost of life insurance coverage. Free file gov If more than this amount is contributed, the annuity or endowment contract is disqualified. Free file gov Kay Bailey Hutchison Spousal IRA Limit For 2013, if you file a joint return and your taxable compensation is less than that of your spouse, the most that can be contributed for the year to your IRA is the smaller of the following two amounts: $5,500 ($6,500 if you are age 50 or older), or The total compensation includible in the gross income of both you and your spouse for the year, reduced by the following two amounts. Free file gov Your spouse's IRA contribution for the year to a traditional IRA. Free file gov Any contributions for the year to a Roth IRA on behalf of your spouse. Free file gov This means that the total combined contributions that can be made for the year to your IRA and your spouse's IRA can be as much as $11,000 ($12,000 if only one of you is age 50 or older or $13,000 if both of you are age 50 or older). Free file gov Note. Free file gov This traditional IRA limit is reduced by any contributions to a section 501(c)(18) plan (generally, a pension plan created before June 25, 1959, that is funded entirely by employee contributions). Free file gov Example. Free file gov Kristin, a full-time student with no taxable compensation, marries Carl during the year. Free file gov Neither of them was age 50 by the end of 2013. Free file gov For the year, Carl has taxable compensation of $30,000. Free file gov He plans to contribute (and deduct) $5,500 to a traditional IRA. Free file gov If he and Kristin file a joint return, each can contribute $5,500 to a traditional IRA. Free file gov This is because Kristin, who has no compensation, can add Carl's compensation, reduced by the amount of his IRA contribution ($30,000 − $5,500 = $24,500), to her own compensation (-0-) to figure her maximum contribution to a traditional IRA. Free file gov In her case, $5,500 is her contribution limit, because $5,500 is less than $24,500 (her compensation for purposes of figuring her contribution limit). Free file gov Filing Status Generally, except as discussed earlier under Kay Bailey Hutchison Spousal IRA Limit , your filing status has no effect on the amount of allowable contributions to your traditional IRA. Free file gov However, if during the year either you or your spouse was covered by a retirement plan at work, your deduction may be reduced or eliminated, depending on your filing status and income. Free file gov See How Much Can You Deduct , later. Free file gov Example. Free file gov Tom and Darcy are married and both are 53. Free file gov They both work and each has a traditional IRA. Free file gov Tom earned $3,800 and Darcy earned $48,000 in 2013. Free file gov Because of the Kay Bailey Hutchison Spousal IRA limit rule, even though Tom earned less than $6,500, they can contribute up to $6,500 to his IRA for 2013 if they file a joint return. Free file gov They can contribute up to $6,500 to Darcy's IRA. Free file gov If they file separate returns, the amount that can be contributed to Tom's IRA is limited by his earned income, $3,800. Free file gov Less Than Maximum Contributions If contributions to your traditional IRA for a year were less than the limit, you cannot contribute more after the due date of your return for that year to make up the difference. Free file gov Example. Free file gov Rafael, who is 40, earns $30,000 in 2013. Free file gov Although he can contribute up to $5,500 for 2013, he contributes only $3,000. Free file gov After April 15, 2014, Rafael cannot make up the difference between his actual contributions for 2013 ($3,000) and his 2013 limit ($5,500). Free file gov He cannot contribute $2,500 more than the limit for any later year. Free file gov More Than Maximum Contributions If contributions to your IRA for a year were more than the limit, you can apply the excess contribution in one year to a later year if the contributions for that later year are less than the maximum allowed for that year. Free file gov However, a penalty or additional tax may apply. Free file gov See Excess Contributions , later, under What Acts Result in Penalties or Additional Taxes. Free file gov When Can Contributions Be Made? As soon as you open your traditional IRA, contributions can be made to it through your chosen sponsor (trustee or other administrator). Free file gov Contributions must be in the form of money (cash, check, or money order). Free file gov Property cannot be contributed. Free file gov Although property cannot be contributed, your IRA may invest in certain property. Free file gov For example, your IRA may purchase shares of stock. Free file gov For other restrictions on the use of funds in your IRA, see Prohibited Transactions , later in this chapter. Free file gov You may be able to transfer or roll over certain property from one retirement plan to another. Free file gov See the discussion of rollovers and other transfers later in this chapter under Can You Move Retirement Plan Assets . Free file gov You can make a contribution to your IRA by having your income tax refund (or a portion of your refund), if any, paid directly to your traditional IRA, Roth IRA, or SEP IRA. Free file gov For details, see the instructions for your income tax return or Form 8888, Allocation of Refund (Including Savings Bond Purchases). Free file gov Contributions can be made to your traditional IRA for each year that you receive compensation and have not reached age 70½. Free file gov For any year in which you do not work, contributions cannot be made to your IRA unless you receive alimony, nontaxable combat pay, military differential pay, or file a joint return with a spouse who has compensation. Free file gov See Who Can Open a Traditional IRA , earlier. Free file gov Even if contributions cannot be made for the current year, the amounts contributed for years in which you did qualify can remain in your IRA. Free file gov Contributions can resume for any years that you qualify. Free file gov Contributions must be made by due date. Free file gov   Contributions can be made to your traditional IRA for a year at any time during the year or by the due date for filing your return for that year, not including extensions. Free file gov For most people, this means that contributions for 2013 must be made by April 15, 2014, and contributions for 2014 must be made by April 15, 2015. Free file gov Age 70½ rule. Free file gov   Contributions cannot be made to your traditional IRA for the year in which you reach age 70½ or for any later year. Free file gov   You attain age 70½ on the date that is 6 calendar months after the 70th anniversary of your birth. Free file gov If you were born on or before June 30, 1943, you cannot contribute for 2013 or any later year. Free file gov Designating year for which contribution is made. Free file gov   If an amount is contributed to your traditional IRA between January 1 and April 15, you should tell the sponsor which year (the current year or the previous year) the contribution is for. Free file gov If you do not tell the sponsor which year it is for, the sponsor can assume, and report to the IRS, that the contribution is for the current year (the year the sponsor received it). Free file gov Filing before a contribution is made. Free file gov    You can file your return claiming a traditional IRA contribution before the contribution is actually made. Free file gov Generally, the contribution must be made by the due date of your return, not including extensions. Free file gov Contributions not required. Free file gov   You do not have to contribute to your traditional IRA for every tax year, even if you can. Free file gov How Much Can You Deduct? Generally, you can deduct the lesser of: The contributions to your traditional IRA for the year, or The general limit (or the Kay Bailey Hutchison Spousal IRA limit, if applicable) explained earlier under How Much Can Be Contributed . Free file gov However, if you or your spouse was covered by an employer retirement plan, you may not be able to deduct this amount. Free file gov See Limit if Covered by Employer Plan , later. Free file gov You may be able to claim a credit for contributions to your traditional IRA. Free file gov For more information, see chapter 4. Free file gov Trustees' fees. Free file gov   Trustees' administrative fees that are billed separately and paid in connection with your traditional IRA are not deductible as IRA contributions. Free file gov However, they may be deductible as a miscellaneous itemized deduction on Schedule A (Form 1040). Free file gov For information about miscellaneous itemized deductions, see Publication 529, Miscellaneous Deductions. Free file gov Brokers' commissions. Free file gov   These commissions are part of your IRA contribution and, as such, are deductible subject to the limits. Free file gov Full deduction. Free file gov   If neither you nor your spouse was covered for any part of the year by an employer retirement plan, you can take a deduction for total contributions to one or more of your traditional IRAs of up to the lesser of: $5,500 ($6,500 if you are age 50 or older), or 100% of your compensation. Free file gov   This limit is reduced by any contributions made to a 501(c)(18) plan on your behalf. Free file gov Kay Bailey Hutchison Spousal IRA. Free file gov   In the case of a married couple with unequal compensation who file a joint return, the deduction for contributions to the traditional IRA of the spouse with less compensation is limited to the lesser of: $5,500 ($6,500 if the spouse with the lower compensation is age 50 or older), or The total compensation includible in the gross income of both spouses for the year reduced by the following three amounts. Free file gov The IRA deduction for the year of the spouse with the greater compensation. Free file gov Any designated nondeductible contribution for the year made on behalf of the spouse with the greater compensation. Free file gov Any contributions for the year to a Roth IRA on behalf of the spouse with the greater compensation. Free file gov   This limit is reduced by any contributions to a section 501(c)(18) plan on behalf of the spouse with the lesser compensation. Free file gov Note. Free file gov If you were divorced or legally separated (and did not remarry) before the end of the year, you cannot deduct any contributions to your spouse's IRA. Free file gov After a divorce or legal separation, you can deduct only the contributions to your own IRA. Free file gov Your deductions are subject to the rules for single individuals. Free file gov Covered by an employer retirement plan. Free file gov   If you or your spouse was covered by an employer retirement plan at any time during the year for which contributions were made, your deduction may be further limited. Free file gov This is discussed later under Limit if Covered by Employer Plan . Free file gov Limits on the amount you can deduct do not affect the amount that can be contributed. Free file gov Are You Covered by an Employer Plan? The Form W-2 you receive from your employer has a box used to indicate whether you were covered for the year. Free file gov The “Retirement Plan” box should be checked if you were covered. Free file gov Reservists and volunteer firefighters should also see Situations in Which You Are Not Covered , later. Free file gov If you are not certain whether you were covered by your employer's retirement plan, you should ask your employer. Free file gov Federal judges. Free file gov   For purposes of the IRA deduction, federal judges are covered by an employer plan. Free file gov For Which Year(s) Are You Covered? Special rules apply to determine the tax years for which you are covered by an employer plan. Free file gov These rules differ depending on whether the plan is a defined contribution plan or a defined benefit plan. Free file gov Tax year. Free file gov   Your tax year is the annual accounting period you use to keep records and report income and expenses on your income tax return. Free file gov For almost all people, the tax year is the calendar year. Free file gov Defined contribution plan. Free file gov   Generally, you are covered by a defined contribution plan for a tax year if amounts are contributed or allocated to your account for the plan year that ends with or within that tax year. Free file gov However, also see Situations in Which You Are Not Covered , later. Free file gov   A defined contribution plan is a plan that provides for a separate account for each person covered by the plan. Free file gov In a defined contribution plan, the amount to be contributed to each participant's account is spelled out in the plan. Free file gov The level of benefits actually provided to a participant depends on the total amount contributed to that participant's account and any earnings and losses on those contributions. Free file gov Types of defined contribution plans include profit-sharing plans, stock bonus plans, and money purchase pension plans. Free file gov Example. Free file gov Company A has a money purchase pension plan. Free file gov Its plan year is from July 1 to June 30. Free file gov The plan provides that contributions must be allocated as of June 30. Free file gov Bob, an employee, leaves Company A on December 31, 2012. Free file gov The contribution for the plan year ending on June 30, 2013, is made February 15, 2014. Free file gov Because an amount is contributed to Bob's account for the plan year, Bob is covered by the plan for his 2013 tax year. Free file gov   A special rule applies to certain plans in which it is not possible to determine if an amount will be contributed to your account for a given plan year. Free file gov If, for a plan year, no amounts have been allocated to your account that are attributable to employer contributions, employee contributions, or forfeitures, by the last day of the plan year, and contributions are discretionary for the plan year, you are not covered for the tax year in which the plan year ends. Free file gov If, after the plan year ends, the employer makes a contribution for that plan year, you are covered for the tax year in which the contribution is made. Free file gov Example. Free file gov Mickey was covered by a profit-sharing plan and left the company on December 31, 2012. Free file gov The plan year runs from July 1 to June 30. Free file gov Under the terms of the plan, employer contributions do not have to be made, but if they are made, they are contributed to the plan before the due date for filing the company's tax return. Free file gov Such contributions are allocated as of the last day of the plan year, and allocations are made to the accounts of individuals who have any service during the plan year. Free file gov As of June 30, 2013, no contributions were made that were allocated to the June 30, 2013, plan year, and no forfeitures had been allocated within the plan year. Free file gov In addition, as of that date, the company was not obligated to make a contribution for such plan year and it was impossible to determine whether or not a contribution would be made for the plan year. Free file gov On December 31, 2013, the company decided to contribute to the plan for the plan year ending June 30, 2013. Free file gov That contribution was made on February 15, 2014. Free file gov Mickey is an active participant in the plan for his 2014 tax year but not for his 2013 tax year. Free file gov No vested interest. Free file gov   If an amount is allocated to your account for a plan year, you are covered by that plan even if you have no vested interest in (legal right to) the account. Free file gov Defined benefit plan. Free file gov   If you are eligible to participate in your employer's defined benefit plan for the plan year that ends within your tax year, you are covered by the plan. Free file gov This rule applies even if you: Declined to participate in the plan, Did not make a required contribution, or Did not perform the minimum service required to accrue a benefit for the year. Free file gov   A defined benefit plan is any plan that is not a defined contribution plan. Free file gov In a defined benefit plan, the level of benefits to be provided to each participant is spelled out in the plan. Free file gov The plan administrator figures the amount needed to provide those benefits and those amounts are contributed to the plan. Free file gov Defined benefit plans include pension plans and annuity plans. Free file gov Example. Free file gov Nick, an employee of Company B, is eligible to participate in Company B's defined benefit plan, which has a July 1 to June 30 plan year. Free file gov Nick leaves Company B on December 31, 2012. Free file gov Because Nick is eligible to participate in the plan for its year ending June 30, 2013, he is covered by the plan for his 2013 tax year. Free file gov No vested interest. Free file gov   If you accrue a benefit for a plan year, you are covered by that plan even if you have no vested interest in (legal right to) the accrual. Free file gov Situations in Which You Are Not Covered Unless you are covered by another employer plan, you are not covered by an employer plan if you are in one of the situations described below. Free file gov Social security or railroad retirement. Free file gov   Coverage under social security or railroad retirement is not coverage under an employer retirement plan. Free file gov Benefits from previous employer's plan. Free file gov   If you receive retirement benefits from a previous employer's plan, you are not covered by that plan. Free file gov Reservists. Free file gov   If the only reason you participate in a plan is because you are a member of a reserve unit of the Armed Forces, you may not be covered by the plan. Free file gov You are not covered by the plan if both of the following conditions are met. Free file gov The plan you participate in is established for its employees by: The United States, A state or political subdivision of a state, or An instrumentality of either (a) or (b) above. Free file gov You did not serve more than 90 days on active duty during the year (not counting duty for training). Free file gov Volunteer firefighters. Free file gov   If the only reason you participate in a plan is because you are a volunteer firefighter, you may not be covered by the plan. Free file gov You are not covered by the plan if both of the following conditions are met. Free file gov The plan you participate in is established for its employees by: The United States, A state or political subdivision of a state, or An instrumentality of either (a) or (b) above. Free file gov Your accrued retirement benefits at the beginning of the year will not provide more than $1,800 per year at retirement. Free file gov Limit if Covered by Employer Plan As discussed earlier, the deduction you can take for contributions made to your traditional IRA depends on whether you or your spouse was covered for any part of the year by an employer retirement plan. Free file gov Your deduction is also affected by how much income you had and by your filing status. Free file gov Your deduction may also be affected by social security benefits you received. Free file gov Reduced or no deduction. Free file gov   If either you or your spouse was covered by an employer retirement plan, you may be entitled to only a partial (reduced) deduction or no deduction at all, depending on your income and your filing status. Free file gov   Your deduction begins to decrease (phase out) when your income rises above a certain amount and is eliminated altogether when it reaches a higher amount. Free file gov These amounts vary depending on your filing status. Free file gov   To determine if your deduction is subject to the phaseout, you must determine your modified adjusted gross income (AGI) and your filing status, as explained later under Deduction Phaseout . Free file gov Once you have determined your modified AGI and your filing status, you can use Table 1-2 or Table 1-3 to determine if the phaseout applies. Free file gov Social Security Recipients Instead of using Table 1-2 or Table 1-3 and Worksheet 1-2, Figuring Your Reduced IRA Deduction for 2013, later, complete the worksheets in Appendix B of this publication if, for the year, all of the following apply. Free file gov You received social security benefits. Free file gov You received taxable compensation. Free file gov Contributions were made to your traditional IRA. Free file gov You or your spouse was covered by an employer retirement plan. Free file gov Use the worksheets in Appendix B to figure your IRA deduction, your nondeductible contribution, and the taxable portion, if any, of your social security benefits. Free file gov Appendix B includes an example with filled-in worksheets to assist you. Free file gov Table 1-2. Free file gov Effect of Modified AGI1 on Deduction if You Are Covered by a Retirement Plan at Work If you are covered by a retirement plan at work, use this table to determine if your modified AGI affects the amount of your deduction. Free file gov IF your filing status is . Free file gov . Free file gov . Free file gov AND your modified adjusted gross income (modified AGI) is . Free file gov . Free file gov . Free file gov THEN you can take . Free file gov . Free file gov . Free file gov single or head of household $59,000 or less a full deduction. Free file gov more than $59,000 but less than $69,000 a partial deduction. Free file gov $69,000 or more no deduction. Free file gov married filing jointly or  qualifying widow(er) $95,000 or less a full deduction. Free file gov more than $95,000 but less than $115,000 a partial deduction. Free file gov $115,000 or more no deduction. Free file gov married filing separately2 less than $10,000 a partial deduction. Free file gov $10,000 or more no deduction. Free file gov 1 Modified AGI (adjusted gross income). Free file gov See Modified adjusted gross income (AGI) , later. Free file gov  2 If you did not live with your spouse at any time during the year, your filing status is considered Single for this purpose (therefore, your IRA deduction is determined under the “Single” filing status). Free file gov Table 1-3. Free file gov Effect of Modified AGI1 on Deduction if You Are NOT Covered by a Retirement Plan at Work If you are not covered by a retirement plan at work, use this table to determine if your modified AGI affects the amount of your deduction. Free file gov IF your filing status is . Free file gov . Free file gov . Free file gov AND your modified adjusted gross income (modified AGI) is . Free file gov . Free file gov . Free file gov THEN you can take . Free file gov . Free file gov . Free file gov single, head of household, or qualifying widow(er) any amount a full deduction. Free file gov married filing jointly or separately with a spouse who is not covered by a plan at work any amount a full deduction. Free file gov married filing jointly with a spouse who is covered by a plan at work $178,000 or less a full deduction. Free file gov more than $178,000 but less than $188,000 a partial deduction. Free file gov $188,000 or more no deduction. Free file gov married filing separately with a spouse who is covered by a plan at work2 less than $10,000 a partial deduction. Free file gov $10,000 or more no deduction. Free file gov 1 Modified AGI (adjusted gross income). Free file gov See Modified adjusted gross income (AGI) , later. Free file gov  2 You are entitled to the full deduction if you did not live with your spouse at any time during the year. Free file gov For 2014, if you are not covered by a retirement plan at work and you are married filing jointly with a spouse who is covered by a plan at work, your deduction is phased out if your modified AGI is more than $181,000 but less than $191,000. Free file gov If your AGI is $191,000 or more, you cannot take a deduction for a contribution to a traditional IRA. Free file gov Deduction Phaseout The amount of any reduction in the limit on your IRA deduction (phaseout) depends on whether you or your spouse was covered by an employer retirement plan. Free file gov Covered by a retirement plan. Free file gov   If you are covered by an employer retirement plan and you did not receive any social security retirement benefits, your IRA deduction may be reduced or eliminated depending on your filing status and modified AGI, as shown in Table 1-2. Free file gov For 2014, if you are covered by a retirement plan at work, your IRA deduction will not be reduced (phased out) unless your modified AGI is: More than $60,000 but less than $70,000 for a single individual (or head of household), More than $96,000 but less than $116,000 for a married couple filing a joint return (or a qualifying widow(er)), or Less than $10,000 for a married individual filing a separate return. Free file gov If your spouse is covered. Free file gov   If you are not covered by an employer retirement plan, but your spouse is, and you did not receive any social security benefits, your IRA deduction may be reduced or eliminated entirely depending on your filing status and modified AGI as shown in Table 1-3. Free file gov Filing status. Free file gov   Your filing status depends primarily on your marital status. Free file gov For this purpose, you need to know if your filing status is single or head of household, married filing jointly or qualifying widow(er), or married filing separately. Free file gov If you need more information on filing status, see Publication 501, Exemptions, Standard Deduction, and Filing Information. Free file gov Lived apart from spouse. Free file gov   If you did not live with your spouse at any time during the year and you file a separate return, your filing status, for this purpose, is single. Free file gov Modified adjusted gross income (AGI). Free file gov   You can use Worksheet 1-1 to figure your modified AGI. Free file gov If you made contributions to your IRA for 2013 and received a distribution from your IRA in 2013, see Both contributions for 2013 and distributions in 2013 , later. Free file gov    Do not assume that your modified AGI is the same as your compensation. Free file gov Your modified AGI may include income in addition to your compensation (discussed earlier) such as interest, dividends, and income from IRA distributions. Free file gov Form 1040. Free file gov   If you file Form 1040, refigure the amount on the page 1 “adjusted gross income” line without taking into account any of the following amounts. Free file gov IRA deduction. Free file gov Student loan interest deduction. Free file gov Tuition and fees deduction. Free file gov Domestic production activities deduction. Free file gov Foreign earned income exclusion. Free file gov Foreign housing exclusion or deduction. Free file gov Exclusion of qualified savings bond interest shown on Form 8815. Free file gov Exclusion of employer-provided adoption benefits shown on Form 8839. Free file gov This is your modified AGI. Free file gov Form 1040A. Free file gov   If you file Form 1040A, refigure the amount on the page 1 “adjusted gross income” line without taking into account any of the following amounts. Free file gov IRA deduction. Free file gov Student loan interest deduction. Free file gov Tuition and fees deduction. Free file gov Exclusion of qualified savings bond interest shown on Form 8815. Free file gov This is your modified AGI. Free file gov Form 1040NR. Free file gov   If you file Form 1040NR, refigure the amount on the page 1 “adjusted gross income” line without taking into account any of the following amounts. Free file gov IRA deduction. Free file gov Student loan interest deduction. Free file gov Domestic production activities deduction. Free file gov Exclusion of qualified savings bond interest shown on Form 8815. Free file gov Exclusion of employer-provided adoption benefits shown on Form 8839. Free file gov This is your modified AGI. Free file gov Income from IRA distributions. Free file gov   If you received distributions in 2013 from one or more traditional IRAs and your traditional IRAs include only deductible contributions, the distributions are fully taxable and are included in your modified AGI. Free file gov Both contributions for 2013 and distributions in 2013. Free file gov   If all three of the following apply, any IRA distributions you received in 2013 may be partly tax free and partly taxable. Free file gov You received distributions in 2013 from one or more traditional IRAs, You made contributions to a traditional IRA for 2013, and Some of those contributions may be nondeductible contributions. Free file gov (See Nondeductible Contributions and Worksheet 1-2, later. Free file gov ) If this is your situation, you must figure the taxable part of the traditional IRA distribution before you can figure your modified AGI. Free file gov To do this, you can use Worksheet 1-5, later. Free file gov   If at least one of the above does not apply, figure your modified AGI using Worksheet 1-1, later. Free file gov How To Figure Your Reduced IRA Deduction If you or your spouse is covered by an employer retirement plan and you did not receive any social security benefits, you can figure your reduced IRA deduction by using Worksheet 1-2. Free file gov Figuring Your Reduced IRA Deduction for 2013. Free file gov The Instructions for Form 1040, Form 1040A, and Form 1040NR include similar worksheets that you can use instead of the worksheet in this publication. Free file gov If you or your spouse is covered by an employer retirement plan, and you received any social security benefits, see Social Security Recipients , earlier. Free file gov Note. Free file gov If you were married and both you and your spouse contributed to IRAs, figure your deduction and your spouse's deduction separately. Free file gov Worksheet 1-1. Free file gov Figuring Your Modified AGI Use this worksheet to figure your modified AGI for traditional IRA purposes. Free file gov 1. Free file gov Enter your adjusted gross income (AGI) from Form 1040, line 38; Form 1040A, line 22; or Form 1040NR, line 37, figured without taking into account the amount from Form 1040, line 32; Form 1040A, line 17; or Form 1040NR, line 32 1. Free file gov   2. Free file gov Enter any student loan interest deduction from Form 1040, line 33; Form 1040A, line 18; or Form 1040NR, line 33 2. Free file gov   3. Free file gov Enter any tuition and fees deduction from Form 1040, line 34, or Form 1040A, line 19 3. Free file gov   4. Free file gov Enter any domestic production activities deduction from Form 1040, line 35, or Form 1040NR, line 34 4. Free file gov   5. Free file gov Enter any foreign earned income exclusion and/or housing exclusion from Form 2555, line 45, or Form 2555-EZ, line 18 5. Free file gov   6. Free file gov Enter any foreign housing deduction from Form 2555, line 50 6. Free file gov   7. Free file gov Enter any excludable savings bond interest from Form 8815, line 14 7. Free file gov   8. Free file gov Enter any excluded employer-provided adoption benefits from Form 8839, line 28 8. Free file gov   9. Free file gov Add lines 1 through 8. Free file gov This is your Modified AGI for traditional IRA purposes 9. Free file gov   Reporting Deductible Contributions If you file Form 1040, enter your IRA deduction on line 32 of that form. Free file gov If you file Form 1040A, enter your IRA deduction on line 17 of that form. Free file gov If you file Form 1040NR, enter your IRA deduction on line 32 of that form. Free file gov You cannot deduct IRA contributions on Form 1040EZ or Form 1040NR-EZ. Free file gov Self-employed. Free file gov   If you are self-employed (a sole proprietor or partner) and have a SIMPLE IRA, enter your deduction for allowable plan contributions on Form 1040, line 28. Free file gov If you file Form 1040NR, enter your deduction on line 28 of that form. Free file gov Nondeductible Contributions Although your deduction for IRA contributions may be reduced or eliminated, contributions can be made to your IRA of up to the general limit or, if it applies, the Kay Bailey Hutchison Spousal IRA limit. Free file gov The difference between your total permitted contributions and your IRA deduction, if any, is your nondeductible contribution. Free file gov Example. Free file gov Tony is 29 years old and single. Free file gov In 2013, he was covered by a retirement plan at work. Free file gov His salary is $62,000. Free file gov His modified AGI is $70,000. Free file gov Tony makes a $5,500 IRA contribution for 2013. Free file gov Because he was covered by a retirement plan and his modified AGI is above $69,000, he cannot deduct his $5,500 IRA contribution. Free file gov He must designate this contribution as a nondeductible contribution by reporting it on Form 8606. Free file gov Repayment of reservist distributions. Free file gov   Nondeductible contributions may include repayments of qualified reservist distributions. Free file gov For more information, see Qualified reservist repayments under How Much Can Be Contributed, earlier. Free file gov Form 8606. Free file gov   To designate contributions as nondeductible, you must file Form 8606. Free file gov (See the filled-in Forms 8606 in this chapter. Free file gov )   You do not have to designate a contribution as nondeductible until you file your tax return. Free file gov When you file, you can even designate otherwise deductible contributions as nondeductible contributions. Free file gov   You must file Form 8606 to report nondeductible contributions even if you do not have to file a tax return for the year. Free file gov    A Form 8606 is not used for the year that you make a rollover from a qualified retirement plan to a traditional IRA and the rollover includes nontaxable amounts. Free file gov In those situations, a Form 8606 is completed for the year you take a distribution from that IRA. Free file gov See Form 8606 under Distributions Fully or Partly Taxable, later. Free file gov Failure to report nondeductible contributions. Free file gov   If you do not report nondeductible contributions, all of the contributions to your traditional IRA will be treated like deductible contributions when withdrawn. Free file gov All distributions from your IRA will be taxed unless you can show, with satisfactory evidence, that nondeductible contributions were made. Free file gov Penalty for overstatement. Free file gov   If you overstate the amount of nondeductible contributions on your Form 8606 for any tax year, you must pay a penalty of $100 for each overstatement, unless it was due to reasonable cause. Free file gov Penalty for failure to file Form 8606. Free file gov   You will have to pay a $50 penalty if you do not file a required Form 8606, unless you can prove that the failure was due to reasonable cause. Free file gov Tax on earnings on nondeductible contributions. Free file gov   As long as contributions are within the contribution limits, none of the earnings or gains on contributions (deductible or nondeductible) will be taxed until they are distributed. Free file gov Cost basis. Free file gov   You will have a cost basis in your traditional IRA if you made any nondeductible contributions. Free file gov Your cost basis is the sum of the nondeductible contributions to your IRA minus any withdrawals or distributions of nondeductible contributions. Free file gov    Commonly, distributions from your traditional IRAs will include both taxable and nontaxable (cost basis) amounts. Free file gov See Are Distributions Taxable, later, for more information. Free file gov Recordkeeping. Free file gov There is a recordkeeping worksheet, Appendix A. Free file gov Summary Record of Traditional IRA(s) for 2013 , that you can use to keep a record of deductible and nondeductible IRA contributions. Free file gov Examples — Worksheet for Reduced IRA Deduction for 2013 The following examples illustrate the use of Worksheet 1-2, Figuring Your Reduced IRA Deduction for 2013. Free file gov Example 1. Free file gov For 2013, Tom and Betty file a joint return on Form 1040. Free file gov They are both 39 years old. Free file gov They are both employed and Tom is covered by his employer's retirement plan. Free file gov Tom's salary is $59,000 and Betty's is $32,555. Free file gov They each have a traditional IRA and their combined modified AGI, which includes $5,000 interest and dividend income, is $96,555. Free file gov Because their modified AGI is between $95,000 and $115,000 and Tom is covered by an employer plan, Tom is subject to the deduction phaseout discussed earlier under Limit if Covered by Employer Plan . Free file gov For 2013, Tom contributed $5,500 to his IRA and Betty contributed $5,500 to hers. Free file gov Even though they file a joint return, they must use separate worksheets to figure the IRA deduction for each of them. Free file gov Tom can take a deduction of only $5,080. Free file gov He can choose to treat the $5,080 as either deductible or nondeductible contributions. Free file gov He can either leave the $420 ($5,500 − $5,080) of nondeductible contributions in his IRA or withdraw them by April 15, 2014. Free file gov He decides to treat the $5,080 as deductible contributions and leave the $420 of nondeductible contributions in his IRA. Free file gov Using Worksheet 1-2, Figuring Your Reduced IRA Deduction for 2013, Tom figures his deductible and nondeductible amounts as shown on Worksheet 1-2. Free file gov Figuring Your Reduced IRA Deduction for 2013—Example 1 Illustrated. Free file gov Betty figures her IRA deduction as follows. Free file gov Betty can treat all or part of her contributions as either deductible or nondeductible. Free file gov This is because her $5,500 contribution for 2013 is not subject to the deduction phaseout discussed earlier under Limit if Covered by Employer Plan . Free file gov She does not need to use Worksheet 1-2, Figuring Your Reduced IRA Deduction for 2013, because their modified AGI is not within the phaseout range that applies. Free file gov Betty decides to treat her $5,500 IRA contributions as deductible. Free file gov The IRA deductions of $5,080 and $5,500 on the joint return for Tom and Betty total $10,580. Free file gov Example 2. Free file gov For 2013, Ed and Sue file a joint return on Form 1040. Free file gov They are both 39 years old. Free file gov Ed is covered by his employer's retirement plan. Free file gov Ed's salary is $45,000. Free file gov Sue had no compensation for the year and did not contribute to an IRA. Free file gov Sue is not covered by an employer plan. Free file gov Ed contributed $5,500 to his traditional IRA and $5,500 to a traditional IRA for Sue (a Kay Bailey Hutchison Spousal IRA). Free file gov Their combined modified AGI, which includes $2,000 interest and dividend income and a large capital gain from the sale of stock, is $180,555. Free file gov Because the combined modified AGI is $115,000 or more, Ed cannot deduct any of the contribution to his traditional IRA. Free file gov He can either leave the $5,500 of nondeductible contributions in his IRA or withdraw them by April 15, 2014. Free file gov Sue figures her IRA deduction as shown on Worksheet 1-2. Free file gov Figuring Your Reduced IRA Deduction for 2013—Example 2 Illustrated. Free file gov Worksheet 1-2. Free file gov Figuring Your Reduced IRA Deduction for 2013 (Use only if you or your spouse is covered by an employer plan and your modified AGI falls between the two amounts shown below for your coverage situation and filing status. Free file gov ) Note. Free file gov If you were married and both you and your spouse contributed to IRAs, figure your deduction and your spouse's deduction separately. Free file gov IF you . Free file gov . Free file gov . Free file gov AND your  filing status is . Free file gov . Free file gov . Free file gov AND your modified AGI is over . Free file gov . Free file gov . Free file gov THEN enter on  line 1 below . Free file gov . Free file gov . Free file gov       are covered by an employer plan single or head of household $59,000 $69,000     married filing jointly or qualifying widow(er) $95,000 $115,000     married filing separately $0 $10,000     are not covered by an employer plan, but your spouse is covered married filing jointly $178,000 $188,000     married filing separately $0 $10,000     1. Free file gov Enter applicable amount from table above 1. Free file gov   2. Free file gov Enter your modified AGI (that of both spouses, if married filing jointly) 2. Free file gov     Note. Free file gov If line 2 is equal to or more than the amount on line 1, stop here. Free file gov  Your IRA contributions are not deductible. Free file gov See Nondeductible Contributions , earlier. Free file gov     3. Free file gov Subtract line 2 from line 1. Free file gov If line 3 is $10,000 or more ($20,000 or more if married filing jointly or qualifying widow(er) and you are covered by an employer plan), stop here. Free file gov You can take a full IRA deduction for contributions of up to $5,500 ($6,500 if you are age 50 or older) or 100% of your (and if married filing jointly, your spouse's) compensation, whichever is less 3. Free file gov   4. Free file gov Multiply line 3 by the percentage below that applies to you. Free file gov If the result is not a multiple of $10, round it to the next highest multiple of $10. Free file gov (For example, $611. Free file gov 40 is rounded to $620. Free file gov ) However, if the result is less than $200, enter $200. Free file gov         Married filing jointly or qualifying widow(er) and you are covered by an employer plan, multiply line 3 by 27. Free file gov 5% (. Free file gov 275) (by 32. Free file gov 5% (. Free file gov 325) if you are age 50 or older). Free file gov All others, multiply line 3 by 55% (. Free file gov 55) (by 65% (. Free file gov 65) if you are age 50 or older). Free file gov 4. Free file gov   5. Free file gov Enter your compensation minus any deductions on Form 1040 or Form 1040NR, line 27 (deductible part of self-employment tax) and line 28 (self-employed SEP, SIMPLE, and qualified plans). Free file gov If you are filing a joint return and your compensation is less than your spouse's, include your spouse's compensation reduced by his or her traditional IRA and Roth IRA contributions for this year. Free file gov If you file Form 1040 or Form 1040NR, do not reduce your compensation by any losses from self-employment 5. Free file gov   6. Free file gov Enter contributions made, or to be made, to your IRA for 2013, but do not enter more than $5,500 ($6,500 if you are age 50 or older). Free file gov If contributions are more than $5,500 ($6,500 if you are age 50 or older), see Excess Contributions , later. Free file gov 6. Free file gov   7. Free file gov IRA deduction. Free file gov Compare lines 4, 5, and 6. Free file gov Enter the smallest amount (or a smaller amount if you choose) here and on the Form 1040, 1040A, or 1040NR line for your IRA, whichever applies. Free file gov If line 6 is more than line 7 and you want to make a nondeductible contribution, go to line 8 7. Free file gov   8. Free file gov Nondeductible contribution. Free file gov Subtract line 7 from line 5 or 6, whichever is smaller. Free file gov  Enter the result here and on line 1 of your Form 8606 8. Free file gov   Worksheet 1-2. Free file gov Figuring Your Reduced IRA Deduction for 2013—Example 1 Illustrated (Use only if you or your spouse is covered by an employer plan and your modified AGI falls between the two amounts shown below for your coverage situation and filing status. Free file gov ) Note. Free file gov If you were married and both you and your spouse contributed to IRAs, figure your deduction and your spouse's deduction separately. Free file gov IF you . Free file gov . Free file gov . Free file gov AND your  filing status is . Free file gov . Free file gov . Free file gov AND your modified AGI is over . Free file gov . Free file gov . Free file gov THEN enter on  line 1 below . Free file gov . Free file gov . Free file gov       are covered by an employer plan single or head of household $59,000 $69,000     married filing jointly or qualifying widow(er) $95,000 $115,000     married filing separately $0 $10,000     are not covered by an employer plan, but your spouse is covered married filing jointly $178,000 $188,000     married filing separately $0 $10,000     1. Free file gov Enter applicable amount from table above 1. Free file gov 115,000 2. Free file gov Enter your modified AGI (that of both spouses, if married filing jointly) 2. Free file gov 96,555   Note. Free file gov If line 2 is equal to or more than the amount on line 1, stop here. Free file gov  Your IRA contributions are not deductible. Free file gov See Nondeductible Contributions , earlier. Free file gov     3. Free file gov Subtract line 2 from line 1. Free file gov If line 3 is $10,000 or more ($20,000 or more if married filing jointly or qualifying widow(er) and you are covered by an employer plan), stop here. Free file gov You can take a full IRA deduction for contributions of up to $5,500 ($6,500 if you are age 50 or older) or 100% of your (and if married filing jointly, your spouse's) compensation, whichever is less 3. Free file gov 18,445 4. Free file gov Multiply line 3 by the percentage below that applies to you. Free file gov If the result is not a multiple of $10, round it to the next highest multiple of $10. Free file gov (For example, $611. Free file gov 40 is rounded to $620. Free file gov ) However, if the result is less than $200, enter $200. Free file gov         Married filing jointly or qualifying widow(er) and you are covered by an employer plan, multiply line 3 by 27. Free file gov 5% (. Free file gov 275) (by 32. Free file gov 5% (. Free file gov 325) if you are age 50 or older). Free file gov All others, multiply line 3 by 55% (. Free file gov 55) (by 65% (. Free file gov 65) if you are age 50 or older). Free file gov 4. Free file gov 5,080 5. Free file gov Enter your compensation minus any deductions on Form 1040 or Form 1040NR, line 27 (deductible part of self-employment tax) and line 28 (self-employed SEP, SIMPLE, and qualified plans). Free file gov If you are filing a joint return and your compensation is less than your spouse's, include your spouse's compensation reduced by his or her traditional IRA and Roth IRA contributions for this year. Free file gov If you file Form 1040 or Form 1040NR, do not reduce your compensation by any losses from self-employment 5. Free file gov 59,000 6. Free file gov Enter contributions made, or to be made, to your IRA for 2013, but do not enter more than $5,500 ($6,500 if you are age 50 or older). Free file gov If contributions are more than $5,500 ($6,500 if you are age 50 or older), see Excess Contributions , later. Free file gov 6. Free file gov 5,500 7. Free file gov IRA deduction. Free file gov Compare lines 4, 5, and 6. Free file gov Enter the smallest amount (or a smaller amount if you choose) here and on the Form 1040, 1040A, or 1040NR line for your IRA, whichever applies. Free file gov If line 6 is more than line 7 and you want to make a nondeductible contribution, go to line 8 7. Free file gov 5,080 8. Free file gov Nondeductible contribution. Free file gov Subtract line 7 from line 5 or 6, whichever is smaller. Free file gov  Enter the result here and on line 1 of your Form 8606 8. Free file gov 420 Worksheet 1-2. Free file gov Figuring Your Reduced IRA Deduction for 2013—Example 2 Illustrated (Use only if you or your spouse is covered by an employer plan and your modified AGI falls between the two amounts shown below for your coverage situation and filing status. Free file gov ) Note. Free file gov If you were married and both you and your spouse contributed to IRAs, figure your deduction and your spouse's deduction separately. Free file gov IF you . Free file gov . Free file gov . Free file gov AND your  filing status is . Free file gov . Free file gov . Free file gov AND your modified AGI is over . Free file gov . Free file gov . Free file gov THEN enter on  line 1 below . Free file gov . Free file gov . Free file gov       are covered by an employer plan single or head of household $59,000 $69,000     married filing jointly or qualifying widow(er) $95,000 $115,000     married filing separately $0 $10,000     are not covered by an employer plan, but your spouse is covered married filing jointly $178,000 $188,000     married filing separately $0 $10,000     1. Free file gov Enter applicable amount from table above 1. Free file gov 188,000 2. Free file gov Enter your modified AGI (that of both spouses, if married filing jointly) 2. Free file gov 180,555   Note. Free file gov If line 2 is equal to or more than the amount on line 1, stop here. Free file gov  Your IRA contributions are not deductible. Free file gov See Nondeductible Contributions , earlier. Free file gov     3. Free file gov Subtract line 2 from line 1. Free file gov If line 3 is $10,000 or more ($20,000 or more if married filing jointly or qualifying widow(er) and you are covered by an employer plan), stop here. Free file gov You can take a full IRA deduction for contributions of up to $5,500 ($6,500 if you are age 50 or older) or 100% of your (and if married filing jointly, your spouse's) compensation, whichever is less 3. Free file gov 7,445 4. Free file gov Multiply line 3 by the percentage below that applies to you. Free file gov If the result is not a multiple of $10, round it to the next highest multiple of $10. Free file gov (For example, $611. Free file gov 40 is rounded to $620. Free file gov ) However, if the result is less than $200, enter $200. Free file gov         Married filing jointly or qualifying widow(er) and you are covered by an employer plan, multiply line 3 by 27. Free file gov 5% (. Free file gov 275) (by 32. Free file gov 5% (. Free file gov 325) if you are age 50 or older). Free file gov All others, multiply line 3 by 55% (. Free file gov 55) (by 65% (. Free file gov 65) if you are age 50 or older). Free file gov 4. Free file gov 4,100 5. Free file gov Enter your compensation minus any deductions on Form 1040 or Form 1040NR, line 27 (deductible part of self-employment tax) and line 28 (self-employed SEP, SIMPLE, and qualified plans). Free file gov If you are filing a joint return and your compensation is less than your spouse's, include your spouse's compensation reduced by his or her traditional IRA and Roth IRA contributions for this year. Free file gov If you file Form 1040 or Form 1040NR, do not reduce your compensation by any losses from self-employment 5. Free file gov 39,500 6. Free file gov Enter contributions made, or to be made, to your IRA for 2013, but do not enter more than $5,500 ($6,500 if you are age 50 or older). Free file gov If contributions are more than $5,500 ($6,500 if you are age 50 or older), see Excess Contributions , later. Free file gov 6. Free file gov 5,500 7. Free file gov IRA deduction. Free file gov Compare lines 4, 5, and 6. Free file gov Enter the smallest amount (or a smaller amount if you choose) here and on the Form 1040, 1040A, or 1040NR line for your IRA, whichever applies. Free file gov If line 6 is more than line 7 and you want to make a nondeductible contribution, go to line 8 7. Free file gov 4,100 8. Free file gov Nondeductible contribution. Free file gov Subtract line 7 from line 5 or 6, whichever is smaller. Free file gov  Enter the result here and on line 1 of your Form 8606 8. Free file gov 1,400 What if You Inherit an IRA? If you inherit a traditional IRA, you are called a beneficiary. Free file gov A beneficiary can be any person or entity the owner chooses to receive the benefits of the IRA after he or she dies. Free file gov Beneficiaries of a traditional IRA must include in their gross income any taxable distributions they receive. Free file gov Inherited from spouse. Free file gov   If you inherit a traditional IRA from your spouse, you generally have the following three choices. Free file gov You can: Treat it as your own IRA by designating yourself as the account owner. Free file gov Treat it as your own by rolling it over into your IRA, or to the extent it is taxable, into a: Qualified employer plan, Qualified employee annuity plan (section 403(a) plan), Tax-sheltered annuity plan (s
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Standard Mileage Rates for 2013

R-2012-95, Nov. 21, 2012

WASHINGTON — The Internal Revenue Service today issued the 2013 optional standard mileage rates used to calculate the deductible costs of operating an automobile for business, charitable, medical or moving purposes.

Beginning on Jan. 1, 2013, the standard mileage rates for the use of a car (also vans, pickups or panel trucks) will be:

  • 56.5 cents per mile for business miles driven.
  • 24 cents per mile driven for medical or moving purposes.
  • 14 cents per mile driven in service of charitable organizations.

The rate for business miles driven during 2013 increases 1 cent from the 2012 rate. The medical and moving rate is also up 1 cent per mile from the 2012 rate.

The standard mileage rate for business is based on an annual study of the fixed and variable costs of operating an automobile. The rate for medical and moving purposes is based on the variable costs.

Taxpayers always have the option of calculating the actual costs of using their vehicle rather than using the standard mileage rates.

A taxpayer may not use the business standard mileage rate for a vehicle after using any depreciation method under the Modified Accelerated Cost Recovery System (MACRS) or after claiming a Section 179 deduction for that vehicle. In addition, the business standard mileage rate cannot be used for more than four vehicles used simultaneously.

These and other requirements for a taxpayer to use a standard mileage rate to calculate the amount of a deductible business, moving, medical, or charitable expense are in Rev. Proc. 2010-51. Notice 2012-72 contains the standard mileage rates, the amount a taxpayer must use in calculating reductions to basis for depreciation taken under the business standard mileage rate, and the maximum standard automobile cost that a taxpayer may use in computing the allowance under a fixed and variable rate plan.

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Page Last Reviewed or Updated: 22-Nov-2013

The Free File Gov

Free file gov Publication 542 - Introductory Material Table of Contents Introduction Useful Items - You may want to see: Photographs of missing children. Free file gov  The Internal Revenue Service is a proud partner with the National Center for Missing and Exploited Children. Free file gov Photographs of missing children selected by the Center may appear in this publication on pages that would otherwise be blank. Free file gov You can help bring these children home by looking at the photographs and calling 1-800-THE-LOST (1-800-843-5678) if you recognize a child. Free file gov Introduction This publication discusses the general tax laws that apply to ordinary domestic corporations. Free file gov It explains the tax law in plain language so it will be easier to understand. Free file gov However, the information given does not cover every situation and is not intended to replace the law or change its meaning. Free file gov Note. Free file gov This publication is not revised on an annual basis. Free file gov To find changes that may affect current year returns, see the instructions for your income tax return for the current year; and Changes to Current Forms and Publications at www. Free file gov irs. Free file gov gov/formspubs. Free file gov Comments and suggestions. Free file gov   We welcome your comments about this publication and your suggestions for future editions. Free file gov   You can write to us at the following address: Internal Revenue Service Business, Exempt Organizations and International Forms and Publications Branch SE:W:CAR:MP:T:B 1111 Constitution Ave. Free file gov NW, IR-6526 Washington, DC 20224   We respond to many letters by telephone. Free file gov Therefore, it would be helpful if you would include your daytime phone number, including the area code, in your correspondence. Free file gov   You can email us at *taxforms@irs. Free file gov gov (The asterisk must be included in the address). Free file gov Please put “Publications Comment” on the subject line. Free file gov You can also send us comments at www. Free file gov irs. Free file gov gov/formspubs/. Free file gov Select “Comment on Tax Forms and Publications” under “Information about. Free file gov ” Although we cannot respond individually to each comment, we do appreciate your feedback and will consider your comments as we revise our tax products. Free file gov Tax questions. Free file gov   If you have a tax question, visit IRS. Free file gov gov or call 1-800-829-1040. Free file gov We cannot answer tax questions at either of the addresses listed above. Free file gov Ordering forms and publications. Free file gov   Visit www. Free file gov irs. Free file gov gov/formspubs to download forms and publications, call 1-800-829-3676, or write to the National Distribution Center at the address shown under How to Get Tax Help, later in this publication. Free file gov Additional forms. Free file gov   A list of other forms and statements that a corporation may need to file is included at the end of this publication. Free file gov Useful Items - You may want to see: Publication 510 Excise Taxes (Including Fuel Tax Credits and Refunds) 535 Business Expenses 538 Accounting Periods and Methods 544 Sales and Other Dispositions of Assets 550 Investment Income and Expenses 925 Passive Activity and At-Risk Rules 946 How to Depreciate Property Prev  Up  Next   Home   More Online Publications