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Publication 590 - Introductory Material


What's New for 2008

Traditional IRA contribution and deduction limit. The contribution limit to your traditional IRA for 2008 increased to the smaller of the following amounts:

  • $5,000, or

  • Your taxable compensation for the year.

If you were age 50 or older before 2009, the most that can be contributed to your traditional IRA for 2008 is the smaller of the following amounts:

  • $6,000, or

  • Your taxable compensation for the year.

For more information, see How Much Can Be Contributed? in chapter 1.

Roth IRA contribution limit. If contributions on your behalf are made only to Roth IRAs, your contribution limit for 2008 is generally the smaller of:

  • $5,000, or

  • Your taxable compensation for the year.

If you were age 50 or older before 2009 and contributions on your behalf were made only to Roth IRAs, your contribution limit for 2008 is generally the smaller of:

  • $6,000, or

  • Your taxable compensation for the year.

However, if your modified adjusted gross income (AGI) is above a certain amount, your contribution limit may be reduced. For more information, see How Much Can Be Contributed? under Can You Contribute to a Roth IRA? in chapter 2.

Modified AGI limit for traditional IRA contributions increased. For 2008, 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 $85,000 but less than $105,000 for a married couple filing a joint return or a qualifying widow(er),

  • More than $53,000 but less than $63,000 for a single individual or head of household, or

  • Less than $10,000 for a married individual filing a separate return.

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 $159,000 but less than $169,000. If your modified AGI is $169,000 or more, you cannot take a deduction for contributions to a traditional IRA. See How Much Can You Deduct? in chapter 1.

Modified AGI limit for Roth IRA contributions increased. For 2008, your Roth IRA contribution limit is reduced (phased out) in the following situations.

  • Your filing status is married filing jointly or qualifying widow(er) and your modified AGI is at least $159,000. You cannot make a Roth IRA contribution if your modified AGI is $169,000 or more.

  • Your filing status is single, head of household, or married filing separately and you did not live with your spouse at any time in 2008 and your modified AGI is at least $101,000. You cannot make a Roth IRA contribution if your modified AGI is $116,000 or more.

  • Your filing status is married filing separately, you lived with your spouse at any time during the year, and your modified AGI is more than -0-. You cannot make a Roth IRA contribution if your modified AGI is $10,000 or more.

See Can You Contribute to a Roth IRA? in chapter 2.

Modified AGI limit for retirement savings contributions credit increased. For 2008, you may be able to claim the retirement savings contributions credit if your modified adjusted gross income (AGI) is not more than:

  • $53,000 if your filing status is married filing jointly,

  • $39,750 if your filing status is head of household, or

  • $26,500 if your filing status is single, married filing separately, or qualifying widow(er).

See Can you claim the credit? in chapter 5.

Rollovers from qualified retirement plans. Beginning in 2008, you can roll over (convert) amounts from a qualified retirement plan to a Roth IRA. For more information, see Rollover From Employer's Plan Into a Roth IRA in chapter 2.

Economic stimulus payments. Economic stimulus payments directly deposited in your IRA or other tax-favored account in 2008 may be withdrawn tax-free and penalty-free. See Tax-Free Withdrawals of Economic Stimulus Payments under When Can You Withdraw or Use Assets? in chapter 1 for more information.

Military death gratuities and servicemembers' group life insurance (SGLI) payments. If you received a military death gratuity or SGLI payment with respect to a death from injury that occurred after October 6, 2001, you may roll over some or all of the amount received to your Roth IRA. For more information, see Military Death Gratuities and Servicemembers' Group Life Insurance (SGLI) Payments in chapter 2.

Tax relief for the Kansas disaster area.  Special rules may apply if you received a distribution from your IRA and your main home was located in the Kansas disaster area on the date the disaster occurred, and you sustained an economic loss due to the storms and tornadoes.Special rules may also apply if you received a distribution to purchase or construct a main home in the Kansas disaster area, but the home was not purchased or constructed because of the storms and tornadoes.For more information, see Tax Relief for the Kansas Disaster Area , in chapter 5.

Tax relief for the Midwestern disaster areas. Special rules may apply if you received a distribution from your IRA and your main home was located in a Midwestern disaster area on the date the disaster occurred, and you sustained an economic loss due to the severe storms, tornadoes, or flooding.Special rules may also apply if you received a distribution to purchase or construct a main home in a Midwestern disaster area, but the home was not purchased or constructed because of the severe storms, tornadoes, or flooding.For more information, see Tax Relief for the Midwestern Disaster Areas in chapter 5.

Rollover of Exxon Valdez settlement income. If you received qualified settlement income in connection with the Exxon Valdez litigation, you may roll over the amount received, or part of the amount received, to your traditional or Roth IRA. For more information, see Rollover of Exxon Valdez Settlement Income in chapter 1.

Rollover of airline payments. If you are a qualified airline employee, you may contribute any portion of an airline payment paid to you by a commercial passenger airline carrier under a Federal bankruptcy court order to your Roth IRA. For more information, see Rollover of Airline Payments in chapter 2.

What's New for 2009

Modified AGI limit for traditional IRA contributions increased. For 2009, 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 $89,000 but less than $109,000 for a married couple filing a joint return or a qualifying widow(er),

  • More than $55,000 but less than $65,000 for a single individual or head of household, or

  • Less than $10,000 for a married individual filing a separate return.

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 $166,000 but less than $176,000. If your modified AGI is $176,000 or more, you cannot take a deduction for contributions to a traditional IRA. See How Much Can You Deduct? in chapter 1.

Modified AGI limit for Roth IRA contributions increased. For 2009, your Roth IRA contribution limit is reduced (phased out) in the following situations.

  • Your filing status is married filing jointly or qualifying widow(er) and your modified AGI is at least $166,000. You cannot make a Roth IRA contribution if your modified AGI is $176,000 or more.

  • Your filing status is single, head of household, or married filing separately and you did not live with your spouse at any time in 2009 and your modified AGI is at least $105,000. You cannot make a Roth IRA contribution if your modified AGI is $120,000 or more.

  • Your filing status is married filing separately, you lived with your spouse at any time during the year, and your modified AGI is more than -0-. You cannot make a Roth IRA contribution if your modified AGI is $10,000 or more.

See Can You Contribute to a Roth IRA? in chapter 2.

Modified AGI limit for retirement savings contributions credit increased. For 2009, you may be able to claim the retirement savings contributions credit if your modified AGI is not more than:

  • $55,500 if your filing status is married filing jointly,

  • $41,625 if your filing status is head of household, or

  • $27,750 if your filing status is single, married filing separately, or qualifying widow(er).

See Can you claim the credit? in chapter 5.

Temporary waiver of required minimum distribution rules. No minimum distribution is required from your traditional or Roth IRA for 2009. See Temporary waiver of required minimum distribution rules for 2009 in chapter 1.

Reminders

Simplified employee pension (SEP). SEP IRAs are not covered in this publication. They are covered in Publication 560, Retirement Plans for Small Business.

Deemed IRAs. A qualified employer plan (retirement plan) can maintain a separate account or annuity under the plan (a deemed IRA) to receive voluntary employee contributions. If the separate account or annuity otherwise meets the requirements of an IRA, it will be subject only to IRA rules. An employee's account can be treated as a traditional IRA or a Roth IRA.For this purpose, a “qualified employer plan” includes:

  • A qualified pension, profit-sharing, or stock bonus plan (section 401(a) plan),

  • A qualified employee annuity plan (section 403(a) plan),

  • A tax-sheltered annuity plan (section 403(b) plan), and

  • A deferred compensation plan (section 457 plan) maintained by a state, a political subdivision of a state, or an agency or instrumentality of a state or political subdivision of a state.

Contributions to both traditional and Roth IRAs. For information on your combined contribution limit if you contribute to both traditional and Roth IRAs, see Roth IRAs and traditional IRAs under How Much Can Be Contributed? in chapter 2.

Statement of required minimum distribution (RMD). If an RMD is required from your IRA, the trustee, custodian, or issuer that held the IRA at the end of the preceding year must either report the amount of the RMD to you, or offer to calculate it for you. The report or offer must include the date by which the amount must be distributed. The report is due January 31 of the year in which the minimum distribution is required. It can be provided with the year-end fair market value statement that you normally get each year. No report is required for section 403(b) contracts (generally tax-sheltered annuities) or for IRAs of owners who have died.

Waiver of RMD for 2009. You are not required to take an RMD for 2009.

IRA interest. Although interest earned from your IRA is generally not taxed in the year earned, it is not tax-exempt interest. Do not report this interest on your return as tax-exempt interest.

Hurricane tax relief. Special rules apply to the use of retirement funds (including IRAs) by qualified individuals who suffered an economic loss as a result of Hurricane Katrina, Rita, or Wilma. While qualified hurricane distributions can no longer be made, special rules apply to the repayment of these distributions. See Hurricane-Related Relief , in chapter 4, for information on these special rules.

Photographs of missing children. The Internal Revenue Service is a proud partner with the National Center for Missing and Exploited Children. Photographs of missing children selected by the Center may appear in this publication on pages that would otherwise be blank. 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.

Introduction

This publication discusses individual retirement arrangements (IRAs). An IRA is a personal savings plan that gives you tax advantages for setting aside money for retirement.

What are some tax advantages of an IRA?   Two tax advantages of an IRA are that:
  • Contributions you make to an IRA may be fully or partially deductible, depending on which type of IRA you have and on your circumstances, and

  • Generally, amounts in your IRA (including earnings and gains) are not taxed until distributed. In some cases, amounts are not taxed at all if distributed according to the rules.

What's in this publication?   This publication discusses traditional, Roth, and SIMPLE IRAs. It explains the rules for:
  • Setting up an IRA,

  • Contributing to an IRA,

  • Transferring money or property to and from an IRA,

  • Handling an inherited IRA,

  • Receiving distributions (making withdrawals) from an IRA, and

  • Taking a credit for contributions to an IRA.

  It also explains the penalties and additional taxes that apply when the rules are not followed. To assist you in complying with the tax rules for IRAs, this publication contains worksheets, sample forms, and tables, which can be found throughout the publication and in the appendices at the back of the publication.

How to use this publication.   The rules that you must follow depend on which type of IRA you have. Use Table I-1 to help you determine which parts of this publication to read. Also use Table I-1 if you were referred to this publication from instructions to a form.

Comments and suggestions.   We welcome your comments about this publication and your suggestions for future editions.

  You can write to us at the following address:


Internal Revenue Service
Individual Forms and Publications Branch
SE:W:CAR:MP:T:I
1111 Constitution Ave. NW, IR-6526
Washington, DC 20224

  We respond to many letters by telephone. Therefore, it would be helpful if you would include your daytime phone number, including the area code, in your correspondence.

  You can email us at *taxforms@irs.gov. (The asterisk must be included in the address.) Please put “Publications Comment” on the subject line. Although we cannot respond individually to each email, we do appreciate your feedback and will consider your comments as we revise our tax products.

Ordering forms and publications.   Visit www.irs.gov/formspubs to download forms and publications, call 1-800-829-3676, or write to the address below and receive a response within 10 days after your request is received.


Internal Revenue Service
1201 N. Mitsubishi Motorway
Bloomington, IL 61705-6613

Tax questions.   If you have a tax question, check the information available on www.irs.gov or call 1-800-829-1040. We cannot answer tax questions sent to either of the above addresses.

Table I-1. Using This Publication

IF you need
information on ...
THEN see ...
traditional IRAs chapter 1.
Roth IRAs chapter 2, and parts of
chapter 1.
SIMPLE IRAs chapter 3.
disaster-related relief (including hurricane, Midwestern, and Kansas) chapter 4.
the credit for qualified retirement savings contributions (the saver's credit) chapter 5.
how to keep a record of your contributions to, and distributions from, your traditional IRA(s) appendix A.
SEP IRAs and 401(k) plans Publication 560.
Coverdell education savings accounts (formerly called education IRAs) Publication 970.
   
IF for 2008, you
  • received social security benefits,

  • had taxable compensation,

  • contributed to a traditional IRA, and

  • you or your spouse was covered by an employer retirement plan,

and you want to...
THEN see ...
first figure your modified adjusted gross income (AGI) appendix B worksheet 1.
then figure how much of your traditional IRA contribution you can deduct appendix B worksheet 2.
and finally figure how much of your social security is taxable appendix B. worksheet 3.

Useful Items - You may want to see:

Publications

  • 560 Retirement Plans for Small Business (SEP, SIMPLE, and Qualified Plans)

  • 571 Tax-Sheltered Annuity Plans (403(b) Plans)

  • 575 Pension and Annuity Income

  • 939 General Rule for Pensions and Annuities

  • 4492 Information for Taxpayers Affected by Hurricanes Katrina, Rita, and Wilma

  • 4492-A Information for Taxpayers Affected by the May 4, 2007, Kansas Storms and Tornadoes

  • 4492-B Information for Affected Taxpayers in the Midwestern Disaster Areas

Forms (and instructions)

  • W-4P Withholding Certificate for Pension or Annuity Payments

  • 1099-R Distributions From Pensions, Annuities, Retirement or Profit-Sharing Plans, IRAs, Insurance Contracts, etc.

  • 5304-SIMPLE Savings Incentive Match Plan for Employees of Small Employers (SIMPLE)–Not for Use With a Designated Financial Institution

  • 5305-S SIMPLE Individual Retirement Trust Account

  • 5305-SA SIMPLE Individual Retirement Custodial Account

  • 5305-SIMPLE Savings Incentive Match Plan for Employees of Small Employers (SIMPLE)–for Use With a Designated Financial Institution

  • 5329 Additional Taxes on Qualified Plans (Including IRAs) and Other Tax-Favored Accounts

  • 5498 IRA Contribution Information

  • 8606 Nondeductible IRAs

  • 8815 Exclusion of Interest From Series EE and I U.S. Savings Bonds Issued After 1989

  • 8839 Qualified Adoption Expenses

  • 8880 Credit for Qualified Retirement Savings Contributions

  • 8915 Qualified Hurricane Retirement Plan Distributions and Repayments

  • 8930 Qualified Disaster Recovery Assistance Retirement Plan Distributions and Repayments

See chapter 6 for information about getting these publications and forms.

Table I-2. How Are a Traditional IRA and a Roth IRA Different? This table shows the differences between traditional and Roth IRAs. Answers in the middle column apply to traditional IRAs. Answers in the right column apply to Roth IRAs.

Question Answer
  Traditional IRA? Roth IRA?
Is there an age limit on when I can set up and contribute to a Yes. You must not have reached age 70½ by the end of the year. See Who Can Set Up a Traditional IRA? in chapter 1. No. You can be any age. See Can You Contribute to a Roth IRA? in chapter 2.
If I earned more than $5,000 in 2008 ($6,000 if I was 50 or older by the end of 2008), is there a limit on how much I can contribute to a Yes. For 2008, you can contribute to a traditional IRA up to:
  • $5,000, or

  • $6,000 if you were age 50 or older by the end of 2008.


There is no upper limit on how much you can earn and still contribute. See How Much Can Be Contributed? in chapter 1.
Yes. For 2008, you may be able to contribute to a Roth IRA up to:
  • $5,000, or

  • $6,000 if you were age 50 or older by the end of 2008,


but the amount you can contribute may be less than that depending on your income, filing status, and if you contribute to another IRA. See How Much Can Be Contributed? and Table 2-1 in chapter 2.
Can I deduct contributions to a Yes. You may be able to deduct your contributions to a traditional IRA depending on your income, filing status, whether you are covered by a retirement plan at work, and whether you receive social security benefits. See How Much Can You Deduct ? in chapter 1. No. You can never deduct contributions to a Roth IRA. See What Is a Roth IRA? in chapter 2.
Do I have to file a form just because I contribute to a Not unless you make nondeductible contributions to your traditional IRA. In that case, you must file Form 8606. See Nondeductible Contributions in chapter 1. No. You do not have to file a form if you contribute to a Roth IRA. See Contributions not reported in chapter 2.
Do I have to start taking distributions when I reach a certain age from a Yes. You must begin receiving required minimum distributions by April 1 of the year following the year you reach age 70½. See When Must You Withdraw Assets? (Required Minimum Distributions) in chapter 1. No. If you are the original owner of a Roth IRA, you do not have to take distributions regardless of your age. See Are Distributions Taxable? in chapter 2. However, if you are the beneficiary of a Roth IRA, you may have to take distributions. See Distributions After Owner's Death in chapter 2.
How are distributions taxed from a Distributions from a traditional IRA are taxed as ordinary income, but if you made nondeductible contributions, not all of the distribution is taxable. See Are Distributions Taxable? in chapter 1. Distributions from a Roth IRA are not taxed as long as you meet certain criteria. See Are Distributions Taxable? in chapter 2.
Do I have to file a form just because I receive distributions from a Not unless you have ever made a nondeductible contribution to a traditional IRA. If you have, file Form 8606. Yes. File Form 8606 if you received distributions from a Roth IRA (other than a rollover, qualified charitable distribution, one-time distribution to fund an HSA, recharacterization, certain qualified distributions, or a return of certain contributions).

Note.

You may be able to contribute up to $8,000 if you participated in a 401(k) plan and the employer who maintained the plan went into bankruptcy in an earlier year. For more information, see Catch-up contributions in certain employer bankruptcies in chapter 1 for traditional IRAs and in chapter 2 for Roth IRAs.


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