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H&r block free online e file 1. H&r block free online e file   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. H&r block free online e file When repayment contributions can be made. H&r block free online e file No deduction. H&r block free online e file Reserve component. H&r block free online e file Figuring your IRA deduction. H&r block free online e file Reporting the repayment. H&r block free online e file Example. H&r block free online e file 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. H&r block free online e file 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. H&r block free online e file Can You Move Retirement Plan Assets?Transfers to Roth IRAs from other retirement plans. H&r block free online e file 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. H&r block free online e file 2013 Reporting. H&r block free online e file Additional reporting requirements if you made the election to treat a January 2013 QCD as made in 2012. H&r block free online e file One-time transfer. H&r block free online e file Testing period rules apply. H&r block free online e file More information. H&r block free online e file 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. H&r block free online e file  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. H&r block free online e file 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. H&r block free online e file For more information, see How Much Can Be Contributed? in this chapter. H&r block free online e file Modified AGI limit for traditional IRA contributions increased. H&r block free online e file  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. H&r block free online e file 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. H&r block free online e file If your modified AGI is $188,000 or more, you cannot take a deduction for contributions to a traditional IRA. H&r block free online e file See How Much Can You Deduct? in this chapter. H&r block free online e file Net Investment Income Tax. H&r block free online e file  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). H&r block free online e file However, these distributions are taken into account when determining the modified adjusted gross income threshold. H&r block free online e file Distributions from a nonqualified retirement plan are included in net investment income. H&r block free online e file See Form 8960, Net Investment Income Tax—Individuals, Estates, and Trusts, and its instructions for more information. H&r block free online e file What's New for 2014 Modified AGI limit for traditional IRA contributions increased. H&r block free online e file  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. H&r block free online e file 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. H&r block free online e file If your modified AGI is $191,000 or more, you cannot take a deduction for contributions to a traditional IRA. H&r block free online e file Introduction This chapter discusses the original IRA. H&r block free online e file In this publication the original IRA (sometimes called an ordinary or regular IRA) is referred to as a “traditional IRA. H&r block free online e file ” A traditional IRA is any IRA that is not a Roth IRA or a SIMPLE IRA. H&r block free online e file 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. H&r block free online e file Generally, amounts in your IRA, including earnings and gains, are not taxed until they are distributed. H&r block free online e file 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. H&r block free online e file You can have a traditional IRA whether or not you are covered by any other retirement plan. H&r block free online e file However, you may not be able to deduct all of your contributions if you or your spouse is covered by an employer retirement plan. H&r block free online e file See How Much Can You Deduct , later. H&r block free online e file Both spouses have compensation. H&r block free online e file   If both you and your spouse have compensation and are under age 70½, each of you can open an IRA. H&r block free online e file You cannot both participate in the same IRA. H&r block free online e file If you file a joint return, only one of you needs to have compensation. H&r block free online e file What Is Compensation? Generally, compensation is what you earn from working. H&r block free online e file For a summary of what compensation does and does not include, see Table 1-1. H&r block free online e file Compensation includes all of the items discussed next (even if you have more than one type). H&r block free online e file Wages, salaries, etc. H&r block free online e file   Wages, salaries, tips, professional fees, bonuses, and other amounts you receive for providing personal services are compensation. H&r block free online e file 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). H&r block free online e file Scholarship and fellowship payments are compensation for IRA purposes only if shown in box 1 of Form W-2. H&r block free online e file Commissions. H&r block free online e file   An amount you receive that is a percentage of profits or sales price is compensation. H&r block free online e file Self-employment income. H&r block free online e file   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. H&r block free online e file   Compensation includes earnings from self-employment even if they are not subject to self-employment tax because of your religious beliefs. H&r block free online e file Self-employment loss. H&r block free online e file   If you have a net loss from self-employment, do not subtract the loss from your salaries or wages when figuring your total compensation. H&r block free online e file Alimony and separate maintenance. H&r block free online e file   For IRA purposes, compensation includes any taxable alimony and separate maintenance payments you receive under a decree of divorce or separate maintenance. H&r block free online e file Nontaxable combat pay. H&r block free online e file   If you were a member of the U. H&r block free online e file S. H&r block free online e file Armed Forces, compensation includes any nontaxable combat pay you received. H&r block free online e file This amount should be reported in box 12 of your 2013 Form W-2 with code Q. H&r block free online e file Table 1-1. H&r block free online e file Compensation for Purposes of an IRA Includes . H&r block free online e file . H&r block free online e file . H&r block free online e file Does not include . H&r block free online e file . H&r block free online e file . H&r block free online e file   earnings and profits from property. H&r block free online e file wages, salaries, etc. H&r block free online e file     interest and dividend income. H&r block free online e file commissions. H&r block free online e file     pension or annuity income. H&r block free online e file self-employment income. H&r block free online e file     deferred compensation. H&r block free online e file alimony and separate maintenance. H&r block free online e file     income from certain  partnerships. H&r block free online e file nontaxable combat pay. H&r block free online e file     any amounts you exclude from income. H&r block free online e file     What Is Not Compensation? Compensation does not include any of the following items. H&r block free online e file Earnings and profits from property, such as rental income, interest income, and dividend income. H&r block free online e file Pension or annuity income. H&r block free online e file Deferred compensation received (compensation payments postponed from a past year). H&r block free online e file Income from a partnership for which you do not provide services that are a material income-producing factor. H&r block free online e file Conservation Reserve Program (CRP) payments reported on Schedule SE (Form 1040), line 1b. H&r block free online e file Any amounts (other than combat pay) you exclude from income, such as foreign earned income and housing costs. H&r block free online e file When Can a Traditional IRA Be Opened? You can open a traditional IRA at any time. H&r block free online e file However, the time for making contributions for any year is limited. H&r block free online e file See When Can Contributions Be Made , later. H&r block free online e file How Can a Traditional IRA Be Opened? You can open different kinds of IRAs with a variety of organizations. H&r block free online e file You can open an IRA at a bank or other financial institution or with a mutual fund or life insurance company. H&r block free online e file You can also open an IRA through your stockbroker. H&r block free online e file Any IRA must meet Internal Revenue Code requirements. H&r block free online e file The requirements for the various arrangements are discussed below. H&r block free online e file Kinds of traditional IRAs. H&r block free online e file   Your traditional IRA can be an individual retirement account or annuity. H&r block free online e file It can be part of either a simplified employee pension (SEP) or an employer or employee association trust account. H&r block free online e file 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. H&r block free online e file The account is created by a written document. H&r block free online e file The document must show that the account meets all of the following requirements. H&r block free online e file 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. H&r block free online e file The trustee or custodian generally cannot accept contributions of more than the deductible amount for the year. H&r block free online e file However, rollover contributions and employer contributions to a simplified employee pension (SEP) can be more than this amount. H&r block free online e file Contributions, except for rollover contributions, must be in cash. H&r block free online e file See Rollovers , later. H&r block free online e file You must have a nonforfeitable right to the amount at all times. H&r block free online e file Money in your account cannot be used to buy a life insurance policy. H&r block free online e file Assets in your account cannot be combined with other property, except in a common trust fund or common investment fund. H&r block free online e file You must start receiving distributions by April 1 of the year following the year in which you reach age 70½. H&r block free online e file See When Must You Withdraw Assets? (Required Minimum Distributions) , later. H&r block free online e file Individual Retirement Annuity You can open an individual retirement annuity by purchasing an annuity contract or an endowment contract from a life insurance company. H&r block free online e file 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. H&r block free online e file An individual retirement annuity must meet all the following requirements. H&r block free online e file Your entire interest in the contract must be nonforfeitable. H&r block free online e file The contract must provide that you cannot transfer any portion of it to any person other than the issuer. H&r block free online e file There must be flexible premiums so that if your compensation changes, your payment can also change. H&r block free online e file This provision applies to contracts issued after November 6, 1978. H&r block free online e file 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. H&r block free online e file Distributions must begin by April 1 of the year following the year in which you reach age 70½. H&r block free online e file See When Must You Withdraw Assets? (Required Minimum Distributions) , later. H&r block free online e file Individual Retirement Bonds The sale of individual retirement bonds issued by the federal government was suspended after April 30, 1982. H&r block free online e file The bonds have the following features. H&r block free online e file They stop earning interest when you reach age 70½. H&r block free online e file If you die, interest will stop 5 years after your death, or on the date you would have reached age 70½, whichever is earlier. H&r block free online e file You cannot transfer the bonds. H&r block free online e file If you cash (redeem) the bonds before the year in which you reach age 59½, you may be subject to a 10% additional tax. H&r block free online e file See Age 59½ Rule under Early Distributions, later. H&r block free online e file You can roll over redemption proceeds into IRAs. H&r block free online e file 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. H&r block free online e file Generally, distributions from SEP IRAs are subject to the withdrawal and tax rules that apply to traditional IRAs. H&r block free online e file See Publication 560 for more information about SEPs. H&r block free online e file 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. H&r block free online e file The requirements for individual retirement accounts apply to these traditional IRAs. H&r block free online e file 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. H&r block free online e file 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. H&r block free online e file The disclosure statement must explain certain items in plain language. H&r block free online e file 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. H&r block free online e file This explanation must appear at the beginning of the disclosure statement. H&r block free online e file If you revoke your IRA within the revocation period, the sponsor must return to you the entire amount you paid. H&r block free online e file 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. H&r block free online e file These requirements apply to all sponsors. H&r block free online e file How Much Can Be Contributed? There are limits and other rules that affect the amount that can be contributed to a traditional IRA. H&r block free online e file These limits and rules are explained below. H&r block free online e file Community property laws. H&r block free online e file   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. H&r block free online e file This is the rule even in states with community property laws. H&r block free online e file Brokers' commissions. H&r block free online e file   Brokers' commissions paid in connection with your traditional IRA are subject to the contribution limit. H&r block free online e file For information about whether you can deduct brokers' commissions, see Brokers' commissions , later, under How Much Can You Deduct. H&r block free online e file Trustees' fees. H&r block free online e file   Trustees' administrative fees are not subject to the contribution limit. H&r block free online e file For information about whether you can deduct trustees' fees, see Trustees' fees , later, under How Much Can You Deduct. H&r block free online e file Qualified reservist repayments. H&r block free online e file   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. H&r block free online e file 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. H&r block free online e file 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. H&r block free online e file Limit. H&r block free online e file   Your qualified reservist repayments cannot be more than your qualified reservist distributions, explained under Early Distributions , later. H&r block free online e file When repayment contributions can be made. H&r block free online e file   You cannot make these repayment contributions later than the date that is 2 years after your active duty period ends. H&r block free online e file No deduction. H&r block free online e file   You cannot deduct qualified reservist repayments. H&r block free online e file Reserve component. H&r block free online e file   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. H&r block free online e file Figuring your IRA deduction. H&r block free online e file   The repayment of qualified reservist distributions does not affect the amount you can deduct as an IRA contribution. H&r block free online e file Reporting the repayment. H&r block free online e file   If you repay a qualified reservist distribution, include the amount of the repayment with nondeductible contributions on line 1 of Form 8606. H&r block free online e file Example. H&r block free online e file   In 2013, your IRA contribution limit is $5,500. H&r block free online e file However, because of your filing status and AGI, the limit on the amount you can deduct is $3,500. H&r block free online e file You can make a nondeductible contribution of $2,000 ($5,500 - $3,500). H&r block free online e file In an earlier year you received a $3,000 qualified reservist distribution, which you would like to repay this year. H&r block free online e file   For 2013, you can contribute a total of $8,500 to your IRA. H&r block free online e file 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. H&r block free online e file You contribute the maximum allowable for the year. H&r block free online e file 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. H&r block free online e file The qualified reservist repayment is not deductible. H&r block free online e file Contributions on your behalf to a traditional IRA reduce your limit for contributions to a Roth IRA. H&r block free online e file See chapter 2 for information about Roth IRAs. H&r block free online e file 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. H&r block free online e file Note. H&r block free online e file 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). H&r block free online e file 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. H&r block free online e file (See Nondeductible Contributions , later. H&r block free online e file ) Qualified reservist repayments do not affect this limit. H&r block free online e file Examples. H&r block free online e file George, who is 34 years old and single, earns $24,000 in 2013. H&r block free online e file His IRA contributions for 2013 are limited to $5,500. H&r block free online e file Danny, an unmarried college student working part time, earns $3,500 in 2013. H&r block free online e file His IRA contributions for 2013 are limited to $3,500, the amount of his compensation. H&r block free online e file More than one IRA. H&r block free online e file   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. H&r block free online e file Annuity or endowment contracts. H&r block free online e file   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. H&r block free online e file If more than this amount is contributed, the annuity or endowment contract is disqualified. H&r block free online e file 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. H&r block free online e file Your spouse's IRA contribution for the year to a traditional IRA. H&r block free online e file Any contributions for the year to a Roth IRA on behalf of your spouse. H&r block free online e file 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). H&r block free online e file Note. H&r block free online e file 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). H&r block free online e file Example. H&r block free online e file Kristin, a full-time student with no taxable compensation, marries Carl during the year. H&r block free online e file Neither of them was age 50 by the end of 2013. H&r block free online e file For the year, Carl has taxable compensation of $30,000. H&r block free online e file He plans to contribute (and deduct) $5,500 to a traditional IRA. H&r block free online e file If he and Kristin file a joint return, each can contribute $5,500 to a traditional IRA. H&r block free online e file 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. H&r block free online e file 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). H&r block free online e file 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. H&r block free online e file 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. H&r block free online e file See How Much Can You Deduct , later. H&r block free online e file Example. H&r block free online e file Tom and Darcy are married and both are 53. H&r block free online e file They both work and each has a traditional IRA. H&r block free online e file Tom earned $3,800 and Darcy earned $48,000 in 2013. H&r block free online e file 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. H&r block free online e file They can contribute up to $6,500 to Darcy's IRA. H&r block free online e file If they file separate returns, the amount that can be contributed to Tom's IRA is limited by his earned income, $3,800. H&r block free online e file 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. H&r block free online e file Example. H&r block free online e file Rafael, who is 40, earns $30,000 in 2013. H&r block free online e file Although he can contribute up to $5,500 for 2013, he contributes only $3,000. H&r block free online e file After April 15, 2014, Rafael cannot make up the difference between his actual contributions for 2013 ($3,000) and his 2013 limit ($5,500). H&r block free online e file He cannot contribute $2,500 more than the limit for any later year. H&r block free online e file 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. H&r block free online e file However, a penalty or additional tax may apply. H&r block free online e file See Excess Contributions , later, under What Acts Result in Penalties or Additional Taxes. H&r block free online e file 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). H&r block free online e file Contributions must be in the form of money (cash, check, or money order). H&r block free online e file Property cannot be contributed. H&r block free online e file Although property cannot be contributed, your IRA may invest in certain property. H&r block free online e file For example, your IRA may purchase shares of stock. H&r block free online e file For other restrictions on the use of funds in your IRA, see Prohibited Transactions , later in this chapter. H&r block free online e file You may be able to transfer or roll over certain property from one retirement plan to another. H&r block free online e file See the discussion of rollovers and other transfers later in this chapter under Can You Move Retirement Plan Assets . H&r block free online e file 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. H&r block free online e file For details, see the instructions for your income tax return or Form 8888, Allocation of Refund (Including Savings Bond Purchases). H&r block free online e file Contributions can be made to your traditional IRA for each year that you receive compensation and have not reached age 70½. H&r block free online e file 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. H&r block free online e file See Who Can Open a Traditional IRA , earlier. H&r block free online e file 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. H&r block free online e file Contributions can resume for any years that you qualify. H&r block free online e file Contributions must be made by due date. H&r block free online e file   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. H&r block free online e file 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. H&r block free online e file Age 70½ rule. H&r block free online e file   Contributions cannot be made to your traditional IRA for the year in which you reach age 70½ or for any later year. H&r block free online e file   You attain age 70½ on the date that is 6 calendar months after the 70th anniversary of your birth. H&r block free online e file If you were born on or before June 30, 1943, you cannot contribute for 2013 or any later year. H&r block free online e file Designating year for which contribution is made. H&r block free online e file   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. H&r block free online e file 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). H&r block free online e file Filing before a contribution is made. H&r block free online e file    You can file your return claiming a traditional IRA contribution before the contribution is actually made. H&r block free online e file Generally, the contribution must be made by the due date of your return, not including extensions. H&r block free online e file Contributions not required. H&r block free online e file   You do not have to contribute to your traditional IRA for every tax year, even if you can. H&r block free online e file 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 . H&r block free online e file However, if you or your spouse was covered by an employer retirement plan, you may not be able to deduct this amount. H&r block free online e file See Limit if Covered by Employer Plan , later. H&r block free online e file You may be able to claim a credit for contributions to your traditional IRA. H&r block free online e file For more information, see chapter 4. H&r block free online e file Trustees' fees. H&r block free online e file   Trustees' administrative fees that are billed separately and paid in connection with your traditional IRA are not deductible as IRA contributions. H&r block free online e file However, they may be deductible as a miscellaneous itemized deduction on Schedule A (Form 1040). H&r block free online e file For information about miscellaneous itemized deductions, see Publication 529, Miscellaneous Deductions. H&r block free online e file Brokers' commissions. H&r block free online e file   These commissions are part of your IRA contribution and, as such, are deductible subject to the limits. H&r block free online e file Full deduction. H&r block free online e file   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. H&r block free online e file   This limit is reduced by any contributions made to a 501(c)(18) plan on your behalf. H&r block free online e file Kay Bailey Hutchison Spousal IRA. H&r block free online e file   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. H&r block free online e file The IRA deduction for the year of the spouse with the greater compensation. H&r block free online e file Any designated nondeductible contribution for the year made on behalf of the spouse with the greater compensation. H&r block free online e file Any contributions for the year to a Roth IRA on behalf of the spouse with the greater compensation. H&r block free online e file   This limit is reduced by any contributions to a section 501(c)(18) plan on behalf of the spouse with the lesser compensation. H&r block free online e file Note. H&r block free online e file 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. H&r block free online e file After a divorce or legal separation, you can deduct only the contributions to your own IRA. H&r block free online e file Your deductions are subject to the rules for single individuals. H&r block free online e file Covered by an employer retirement plan. H&r block free online e file   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. H&r block free online e file This is discussed later under Limit if Covered by Employer Plan . H&r block free online e file Limits on the amount you can deduct do not affect the amount that can be contributed. H&r block free online e file 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. H&r block free online e file The “Retirement Plan” box should be checked if you were covered. H&r block free online e file Reservists and volunteer firefighters should also see Situations in Which You Are Not Covered , later. H&r block free online e file If you are not certain whether you were covered by your employer's retirement plan, you should ask your employer. H&r block free online e file Federal judges. H&r block free online e file   For purposes of the IRA deduction, federal judges are covered by an employer plan. H&r block free online e file For Which Year(s) Are You Covered? Special rules apply to determine the tax years for which you are covered by an employer plan. H&r block free online e file These rules differ depending on whether the plan is a defined contribution plan or a defined benefit plan. H&r block free online e file Tax year. H&r block free online e file   Your tax year is the annual accounting period you use to keep records and report income and expenses on your income tax return. H&r block free online e file For almost all people, the tax year is the calendar year. H&r block free online e file Defined contribution plan. H&r block free online e file   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. H&r block free online e file However, also see Situations in Which You Are Not Covered , later. H&r block free online e file   A defined contribution plan is a plan that provides for a separate account for each person covered by the plan. H&r block free online e file In a defined contribution plan, the amount to be contributed to each participant's account is spelled out in the plan. H&r block free online e file 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. H&r block free online e file Types of defined contribution plans include profit-sharing plans, stock bonus plans, and money purchase pension plans. H&r block free online e file Example. H&r block free online e file Company A has a money purchase pension plan. H&r block free online e file Its plan year is from July 1 to June 30. H&r block free online e file The plan provides that contributions must be allocated as of June 30. H&r block free online e file Bob, an employee, leaves Company A on December 31, 2012. H&r block free online e file The contribution for the plan year ending on June 30, 2013, is made February 15, 2014. H&r block free online e file Because an amount is contributed to Bob's account for the plan year, Bob is covered by the plan for his 2013 tax year. H&r block free online e file   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. H&r block free online e file 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. H&r block free online e file 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. H&r block free online e file Example. H&r block free online e file Mickey was covered by a profit-sharing plan and left the company on December 31, 2012. H&r block free online e file The plan year runs from July 1 to June 30. H&r block free online e file 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. H&r block free online e file 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. H&r block free online e file 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. H&r block free online e file 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. H&r block free online e file On December 31, 2013, the company decided to contribute to the plan for the plan year ending June 30, 2013. H&r block free online e file That contribution was made on February 15, 2014. H&r block free online e file Mickey is an active participant in the plan for his 2014 tax year but not for his 2013 tax year. H&r block free online e file No vested interest. H&r block free online e file   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. H&r block free online e file Defined benefit plan. H&r block free online e file   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. H&r block free online e file 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. H&r block free online e file   A defined benefit plan is any plan that is not a defined contribution plan. H&r block free online e file In a defined benefit plan, the level of benefits to be provided to each participant is spelled out in the plan. H&r block free online e file The plan administrator figures the amount needed to provide those benefits and those amounts are contributed to the plan. H&r block free online e file Defined benefit plans include pension plans and annuity plans. H&r block free online e file Example. H&r block free online e file 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. H&r block free online e file Nick leaves Company B on December 31, 2012. H&r block free online e file 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. H&r block free online e file No vested interest. H&r block free online e file   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. H&r block free online e file 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. H&r block free online e file Social security or railroad retirement. H&r block free online e file   Coverage under social security or railroad retirement is not coverage under an employer retirement plan. H&r block free online e file Benefits from previous employer's plan. H&r block free online e file   If you receive retirement benefits from a previous employer's plan, you are not covered by that plan. H&r block free online e file Reservists. H&r block free online e file   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. H&r block free online e file You are not covered by the plan if both of the following conditions are met. H&r block free online e file 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. H&r block free online e file You did not serve more than 90 days on active duty during the year (not counting duty for training). H&r block free online e file Volunteer firefighters. H&r block free online e file   If the only reason you participate in a plan is because you are a volunteer firefighter, you may not be covered by the plan. H&r block free online e file You are not covered by the plan if both of the following conditions are met. H&r block free online e file 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. H&r block free online e file Your accrued retirement benefits at the beginning of the year will not provide more than $1,800 per year at retirement. H&r block free online e file 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. H&r block free online e file Your deduction is also affected by how much income you had and by your filing status. H&r block free online e file Your deduction may also be affected by social security benefits you received. H&r block free online e file Reduced or no deduction. H&r block free online e file   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. H&r block free online e file   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. H&r block free online e file These amounts vary depending on your filing status. H&r block free online e file   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 . H&r block free online e file 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. H&r block free online e file 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. H&r block free online e file You received social security benefits. H&r block free online e file You received taxable compensation. H&r block free online e file Contributions were made to your traditional IRA. H&r block free online e file You or your spouse was covered by an employer retirement plan. H&r block free online e file 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. H&r block free online e file Appendix B includes an example with filled-in worksheets to assist you. H&r block free online e file Table 1-2. H&r block free online e file 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. H&r block free online e file IF your filing status is . H&r block free online e file . H&r block free online e file . H&r block free online e file AND your modified adjusted gross income (modified AGI) is . H&r block free online e file . H&r block free online e file . H&r block free online e file THEN you can take . H&r block free online e file . H&r block free online e file . H&r block free online e file single or head of household $59,000 or less a full deduction. H&r block free online e file more than $59,000 but less than $69,000 a partial deduction. H&r block free online e file $69,000 or more no deduction. H&r block free online e file married filing jointly or  qualifying widow(er) $95,000 or less a full deduction. H&r block free online e file more than $95,000 but less than $115,000 a partial deduction. H&r block free online e file $115,000 or more no deduction. H&r block free online e file married filing separately2 less than $10,000 a partial deduction. H&r block free online e file $10,000 or more no deduction. H&r block free online e file 1 Modified AGI (adjusted gross income). H&r block free online e file See Modified adjusted gross income (AGI) , later. H&r block free online e file  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). H&r block free online e file Table 1-3. H&r block free online e file 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. H&r block free online e file IF your filing status is . H&r block free online e file . H&r block free online e file . H&r block free online e file AND your modified adjusted gross income (modified AGI) is . H&r block free online e file . H&r block free online e file . H&r block free online e file THEN you can take . H&r block free online e file . H&r block free online e file . H&r block free online e file single, head of household, or qualifying widow(er) any amount a full deduction. H&r block free online e file married filing jointly or separately with a spouse who is not covered by a plan at work any amount a full deduction. H&r block free online e file married filing jointly with a spouse who is covered by a plan at work $178,000 or less a full deduction. H&r block free online e file more than $178,000 but less than $188,000 a partial deduction. H&r block free online e file $188,000 or more no deduction. H&r block free online e file married filing separately with a spouse who is covered by a plan at work2 less than $10,000 a partial deduction. H&r block free online e file $10,000 or more no deduction. H&r block free online e file 1 Modified AGI (adjusted gross income). H&r block free online e file See Modified adjusted gross income (AGI) , later. H&r block free online e file  2 You are entitled to the full deduction if you did not live with your spouse at any time during the year. H&r block free online e file 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. H&r block free online e file If your AGI is $191,000 or more, you cannot take a deduction for a contribution to a traditional IRA. H&r block free online e file 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. H&r block free online e file Covered by a retirement plan. H&r block free online e file   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. H&r block free online e file 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. H&r block free online e file If your spouse is covered. H&r block free online e file   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. H&r block free online e file Filing status. H&r block free online e file   Your filing status depends primarily on your marital status. H&r block free online e file 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. H&r block free online e file If you need more information on filing status, see Publication 501, Exemptions, Standard Deduction, and Filing Information. H&r block free online e file Lived apart from spouse. H&r block free online e file   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. H&r block free online e file Modified adjusted gross income (AGI). H&r block free online e file   You can use Worksheet 1-1 to figure your modified AGI. H&r block free online e file 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. H&r block free online e file    Do not assume that your modified AGI is the same as your compensation. H&r block free online e file Your modified AGI may include income in addition to your compensation (discussed earlier) such as interest, dividends, and income from IRA distributions. H&r block free online e file Form 1040. H&r block free online e file   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. H&r block free online e file IRA deduction. H&r block free online e file Student loan interest deduction. H&r block free online e file Tuition and fees deduction. H&r block free online e file Domestic production activities deduction. H&r block free online e file Foreign earned income exclusion. H&r block free online e file Foreign housing exclusion or deduction. H&r block free online e file Exclusion of qualified savings bond interest shown on Form 8815. H&r block free online e file Exclusion of employer-provided adoption benefits shown on Form 8839. H&r block free online e file This is your modified AGI. H&r block free online e file Form 1040A. H&r block free online e file   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. H&r block free online e file IRA deduction. H&r block free online e file Student loan interest deduction. H&r block free online e file Tuition and fees deduction. H&r block free online e file Exclusion of qualified savings bond interest shown on Form 8815. H&r block free online e file This is your modified AGI. H&r block free online e file Form 1040NR. H&r block free online e file   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. H&r block free online e file IRA deduction. H&r block free online e file Student loan interest deduction. H&r block free online e file Domestic production activities deduction. H&r block free online e file Exclusion of qualified savings bond interest shown on Form 8815. H&r block free online e file Exclusion of employer-provided adoption benefits shown on Form 8839. H&r block free online e file This is your modified AGI. H&r block free online e file Income from IRA distributions. H&r block free online e file   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. H&r block free online e file Both contributions for 2013 and distributions in 2013. H&r block free online e file   If all three of the following apply, any IRA distributions you received in 2013 may be partly tax free and partly taxable. H&r block free online e file 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. H&r block free online e file (See Nondeductible Contributions and Worksheet 1-2, later. H&r block free online e file ) If this is your situation, you must figure the taxable part of the traditional IRA distribution before you can figure your modified AGI. H&r block free online e file To do this, you can use Worksheet 1-5, later. H&r block free online e file   If at least one of the above does not apply, figure your modified AGI using Worksheet 1-1, later. H&r block free online e file 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. H&r block free online e file Figuring Your Reduced IRA Deduction for 2013. H&r block free online e file The Instructions for Form 1040, Form 1040A, and Form 1040NR include similar worksheets that you can use instead of the worksheet in this publication. H&r block free online e file If you or your spouse is covered by an employer retirement plan, and you received any social security benefits, see Social Security Recipients , earlier. H&r block free online e file Note. H&r block free online e file If you were married and both you and your spouse contributed to IRAs, figure your deduction and your spouse's deduction separately. H&r block free online e file Worksheet 1-1. H&r block free online e file Figuring Your Modified AGI Use this worksheet to figure your modified AGI for traditional IRA purposes. H&r block free online e file 1. H&r block free online e file 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. H&r block free online e file   2. H&r block free online e file Enter any student loan interest deduction from Form 1040, line 33; Form 1040A, line 18; or Form 1040NR, line 33 2. H&r block free online e file   3. H&r block free online e file Enter any tuition and fees deduction from Form 1040, line 34, or Form 1040A, line 19 3. H&r block free online e file   4. H&r block free online e file Enter any domestic production activities deduction from Form 1040, line 35, or Form 1040NR, line 34 4. H&r block free online e file   5. H&r block free online e file Enter any foreign earned income exclusion and/or housing exclusion from Form 2555, line 45, or Form 2555-EZ, line 18 5. H&r block free online e file   6. H&r block free online e file Enter any foreign housing deduction from Form 2555, line 50 6. H&r block free online e file   7. H&r block free online e file Enter any excludable savings bond interest from Form 8815, line 14 7. H&r block free online e file   8. H&r block free online e file Enter any excluded employer-provided adoption benefits from Form 8839, line 28 8. H&r block free online e file   9. H&r block free online e file Add lines 1 through 8. H&r block free online e file This is your Modified AGI for traditional IRA purposes 9. H&r block free online e file   Reporting Deductible Contributions If you file Form 1040, enter your IRA deduction on line 32 of that form. H&r block free online e file If you file Form 1040A, enter your IRA deduction on line 17 of that form. H&r block free online e file If you file Form 1040NR, enter your IRA deduction on line 32 of that form. H&r block free online e file You cannot deduct IRA contributions on Form 1040EZ or Form 1040NR-EZ. H&r block free online e file Self-employed. H&r block free online e file   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. H&r block free online e file If you file Form 1040NR, enter your deduction on line 28 of that form. H&r block free online e file 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. H&r block free online e file The difference between your total permitted contributions and your IRA deduction, if any, is your nondeductible contribution. H&r block free online e file Example. H&r block free online e file Tony is 29 years old and single. H&r block free online e file In 2013, he was covered by a retirement plan at work. H&r block free online e file His salary is $62,000. H&r block free online e file His modified AGI is $70,000. H&r block free online e file Tony makes a $5,500 IRA contribution for 2013. H&r block free online e file Because he was covered by a retirement plan and his modified AGI is above $69,000, he cannot deduct his $5,500 IRA contribution. H&r block free online e file He must designate this contribution as a nondeductible contribution by reporting it on Form 8606. H&r block free online e file Repayment of reservist distributions. H&r block free online e file   Nondeductible contributions may include repayments of qualified reservist distributions. H&r block free online e file For more information, see Qualified reservist repayments under How Much Can Be Contributed, earlier. H&r block free online e file Form 8606. H&r block free online e file   To designate contributions as nondeductible, you must file Form 8606. H&r block free online e file (See the filled-in Forms 8606 in this chapter. H&r block free online e file )   You do not have to designate a contribution as nondeductible until you file your tax return. H&r block free online e file When you file, you can even designate otherwise deductible contributions as nondeductible contributions. H&r block free online e file   You must file Form 8606 to report nondeductible contributions even if you do not have to file a tax return for the year. H&r block free online e file    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. H&r block free online e file In those situations, a Form 8606 is completed for the year you take a distribution from that IRA. H&r block free online e file See Form 8606 under Distributions Fully or Partly Taxable, later. H&r block free online e file Failure to report nondeductible contributions. H&r block free online e file   If you do not report nondeductible contributions, all of the contributions to your traditional IRA will be treated like deductible contributions when withdrawn. H&r block free online e file All distributions from your IRA will be taxed unless you can show, with satisfactory evidence, that nondeductible contributions were made. H&r block free online e file Penalty for overstatement. H&r block free online e file   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. H&r block free online e file Penalty for failure to file Form 8606. H&r block free online e file   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. H&r block free online e file Tax on earnings on nondeductible contributions. H&r block free online e file   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. H&r block free online e file Cost basis. H&r block free online e file   You will have a cost basis in your traditional IRA if you made any nondeductible contributions. H&r block free online e file Your cost basis is the sum of the nondeductible contributions to your IRA minus any withdrawals or distributions of nondeductible contributions. H&r block free online e file    Commonly, distributions from your traditional IRAs will include both taxable and nontaxable (cost basis) amounts. H&r block free online e file See Are Distributions Taxable, later, for more information. H&r block free online e file Recordkeeping. H&r block free online e file There is a recordkeeping worksheet, Appendix A. H&r block free online e file Summary Record of Traditional IRA(s) for 2013 , that you can use to keep a record of deductible and nondeductible IRA contributions. H&r block free online e file 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. H&r block free online e file Example 1. H&r block free online e file For 2013, Tom and Betty file a joint return on Form 1040. H&r block free online e file They are both 39 years old. H&r block free online e file They are both employed and Tom is covered by his employer's retirement plan. H&r block free online e file Tom's salary is $59,000 and Betty's is $32,555. H&r block free online e file They each have a traditional IRA and their combined modified AGI, which includes $5,000 interest and dividend income, is $96,555. H&r block free online e file 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 . H&r block free online e file For 2013, Tom contributed $5,500 to his IRA and Betty contributed $5,500 to hers. H&r block free online e file Even though they file a joint return, they must use separate worksheets to figure the IRA deduction for each of them. H&r block free online e file Tom can take a deduction of only $5,080. H&r block free online e file He can choose to treat the $5,080 as either deductible or nondeductible contributions. H&r block free online e file He can either leave the $420 ($5,500 − $5,080) of nondeductible contributions in his IRA or withdraw them by April 15, 2014. H&r block free online e file He decides to treat the $5,080 as deductible contributions and leave the $420 of nondeductible contributions in his IRA. H&r block free online e file Using Worksheet 1-2, Figuring Your Reduced IRA Deduction for 2013, Tom figures his deductible and nondeductible amounts as shown on Worksheet 1-2. H&r block free online e file Figuring Your Reduced IRA Deduction for 2013—Example 1 Illustrated. H&r block free online e file Betty figures her IRA deduction as follows. H&r block free online e file Betty can treat all or part of her contributions as either deductible or nondeductible. H&r block free online e file 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 . H&r block free online e file 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. H&r block free online e file Betty decides to treat her $5,500 IRA contributions as deductible. H&r block free online e file The IRA deductions of $5,080 and $5,500 on the joint return for Tom and Betty total $10,580. H&r block free online e file Example 2. H&r block free online e file For 2013, Ed and Sue file a joint return on Form 1040. H&r block free online e file They are both 39 years old. H&r block free online e file Ed is covered by his employer's retirement plan. H&r block free online e file Ed's salary is $45,000. H&r block free online e file Sue had no compensation for the year and did not contribute to an IRA. H&r block free online e file Sue is not covered by an employer plan. H&r block free online e file Ed contributed $5,500 to his traditional IRA and $5,500 to a traditional IRA for Sue (a Kay Bailey Hutchison Spousal IRA). H&r block free online e file 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. H&r block free online e file Because the combined modified AGI is $115,000 or more, Ed cannot deduct any of the contribution to his traditional IRA. H&r block free online e file He can either leave the $5,500 of nondeductible contributions in his IRA or withdraw them by April 15, 2014. H&r block free online e file Sue figures her IRA deduction as shown on Worksheet 1-2. H&r block free online e file Figuring Your Reduced IRA Deduction for 2013—Example 2 Illustrated. H&r block free online e file Worksheet 1-2. H&r block free online e file 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. H&r block free online e file ) Note. H&r block free online e file If you were married and both you and your spouse contributed to IRAs, figure your deduction and your spouse's deduction separately. H&r block free online e file IF you . H&r block free online e file . H&r block free online e file . H&r block free online e file AND your  filing status is . H&r block free online e file . H&r block free online e file . H&r block free online e file AND your modified AGI is over . H&r block free online e file . H&r block free online e file . H&r block free online e file THEN enter on  line 1 below . H&r block free online e file . H&r block free online e file . H&r block free online e file       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. H&r block free online e file Enter applicable amount from table above 1. H&r block free online e file   2. H&r block free online e file Enter your modified AGI (that of both spouses, if married filing jointly) 2. H&r block free online e file     Note. H&r block free online e file If line 2 is equal to or more than the amount on line 1, stop here. H&r block free online e file  Your IRA contributions are not deductible. H&r block free online e file See Nondeductible Contributions , earlier. H&r block free online e file     3. H&r block free online e file Subtract line 2 from line 1. H&r block free online e file 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. H&r block free online e file 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. H&r block free online e file   4. H&r block free online e file Multiply line 3 by the percentage below that applies to you. H&r block free online e file If the result is not a multiple of $10, round it to the next highest multiple of $10. H&r block free online e file (For example, $611. H&r block free online e file 40 is rounded to $620. H&r block free online e file ) However, if the result is less than $200, enter $200. H&r block free online e file         Married filing jointly or qualifying widow(er) and you are covered by an employer plan, multiply line 3 by 27. H&r block free online e file 5% (. H&r block free online e file 275) (by 32. H&r block free online e file 5% (. H&r block free online e file 325) if you are age 50 or older). H&r block free online e file All others, multiply line 3 by 55% (. H&r block free online e file 55) (by 65% (. H&r block free online e file 65) if you are age 50 or older). H&r block free online e file 4. H&r block free online e file   5. H&r block free online e file 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). H&r block free online e file 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. H&r block free online e file If you file Form 1040 or Form 1040NR, do not reduce your compensation by any losses from self-employment 5. H&r block free online e file   6. H&r block free online e file 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). H&r block free online e file If contributions are more than $5,500 ($6,500 if you are age 50 or older), see Excess Contributions , later. H&r block free online e file 6. H&r block free online e file   7. H&r block free online e file IRA deduction. H&r block free online e file Compare lines 4, 5, and 6. H&r block free online e file 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. H&r block free online e file If line 6 is more than line 7 and you want to make a nondeductible contribution, go to line 8 7. H&r block free online e file   8. H&r block free online e file Nondeductible contribution. H&r block free online e file Subtract line 7 from line 5 or 6, whichever is smaller. H&r block free online e file  Enter the result here and on line 1 of your Form 8606 8. H&r block free online e file   Worksheet 1-2. H&r block free online e file 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. H&r block free online e file ) Note. H&r block free online e file If you were married and both you and your spouse contributed to IRAs, figure your deduction and your spouse's deduction separately. H&r block free online e file IF you . H&r block free online e file . H&r block free online e file . H&r block free online e file AND your  filing status is . H&r block free online e file . H&r block free online e file . H&r block free online e file AND your modified AGI is over . H&r block free online e file . H&r block free online e file . H&r block free online e file THEN enter on  line 1 below . H&r block free online e file . H&r block free online e file . H&r block free online e file       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. H&r block free online e file Enter applicable amount from table above 1. H&r block free online e file 115,000 2. H&r block free online e file Enter your modified AGI (that of both spouses, if married filing jointly) 2. H&r block free online e file 96,555   Note. H&r block free online e file If line 2 is equal to or more than the amount on line 1, stop here. H&r block free online e file  Your IRA contributions are not deductible. H&r block free online e file See Nondeductible Contributions , earlier. H&r block free online e file     3. H&r block free online e file Subtract line 2 from line 1. H&r block free online e file 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. H&r block free online e file 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. H&r block free online e file 18,445 4. H&r block free online e file Multiply line 3 by the percentage below that applies to you. H&r block free online e file If the result is not a multiple of $10, round it to the next highest multiple of $10. H&r block free online e file (For example, $611. H&r block free online e file 40 is rounded to $620. H&r block free online e file ) However, if the result is less than $200, enter $200. H&r block free online e file         Married filing jointly or qualifying widow(er) and you are covered by an employer plan, multiply line 3 by 27. H&r block free online e file 5% (. H&r block free online e file 275) (by 32. H&r block free online e file 5% (. H&r block free online e file 325) if you are age 50 or older). H&r block free online e file All others, multiply line 3 by 55% (. H&r block free online e file 55) (by 65% (. H&r block free online e file 65) if you are age 50 or older). H&r block free online e file 4. H&r block free online e file 5,080 5. H&r block free online e file 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). H&r block free online e file 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. H&r block free online e file If you file Form 1040 or Form 1040NR, do not reduce your compensation by any losses from self-employment 5. H&r block free online e file 59,000 6. H&r block free online e file 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). H&r block free online e file If contributions are more than $5,500 ($6,500 if you are age 50 or older), see Excess Contributions , later. H&r block free online e file 6. H&r block free online e file 5,500 7. H&r block free online e file IRA deduction. H&r block free online e file Compare lines 4, 5, and 6. H&r block free online e file 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. H&r block free online e file If line 6 is more than line 7 and you want to make a nondeductible contribution, go to line 8 7. H&r block free online e file 5,080 8. H&r block free online e file Nondeductible contribution. H&r block free online e file Subtract line 7 from line 5 or 6, whichever is smaller. H&r block free online e file  Enter the result here and on line 1 of your Form 8606 8. H&r block free online e file 420 Worksheet 1-2. H&r block free online e file 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. H&r block free online e file ) Note. H&r block free online e file If you were married and both you and your spouse contributed to IRAs, figure your deduction and your spouse's deduction separately. H&r block free online e file IF you . H&r block free online e file . H&r block free online e file . H&r block free online e file AND your  filing status is . H&r block free online e file . H&r block free online e file . H&r block free online e file AND your modified AGI is over . H&r block free online e file . H&r block free online e file . H&r block free online e file THEN enter on  line 1 below . H&r block free online e file . H&r block free online e file . H&r block free online e file       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. H&r block free online e file Enter applicable amount from table above 1. H&r block free online e file 188,000 2. H&r block free online e file Enter your modified AGI (that of both spouses, if married filing jointly) 2. H&r block free online e file 180,555   Note. H&r block free online e file If line 2 is equal to or more than the amount on line 1, stop here. H&r block free online e file  Your IRA contributions are not deductible. H&r block free online e file See Nondeductible Contributions , earlier. H&r block free online e file     3. H&r block free online e file Subtract line 2 from line 1. H&r block free online e file 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. H&r block free online e file 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. H&r block free online e file 7,445 4. H&r block free online e file Multiply line 3 by the percentage below that applies to you. H&r block free online e file If the result is not a multiple of $10, round it to the next highest multiple of $10. H&r block free online e file (For example, $611. H&r block free online e file 40 is rounded to $620. H&r block free online e file ) However, if the result is less than $200, enter $200. H&r block free online e file         Married filing jointly or qualifying widow(er) and you are covered by an employer plan, multiply line 3 by 27. H&r block free online e file 5% (. H&r block free online e file 275) (by 32. H&r block free online e file 5% (. H&r block free online e file 325) if you are age 50 or older). H&r block free online e file All others, multiply line 3 by 55% (. H&r block free online e file 55) (by 65% (. H&r block free online e file 65) if you are age 50 or older). H&r block free online e file 4. H&r block free online e file 4,100 5. H&r block free online e file 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). H&r block free online e file 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. H&r block free online e file If you file Form 1040 or Form 1040NR, do not reduce your compensation by any losses from self-employment 5. H&r block free online e file 39,500 6. H&r block free online e file 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). H&r block free online e file If contributions are more than $5,500 ($6,500 if you are age 50 or older), see Excess Contributions , later. H&r block free online e file 6. H&r block free online e file 5,500 7. H&r block free online e file IRA deduction. H&r block free online e file Compare lines 4, 5, and 6. H&r block free online e file 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. H&r block free online e file If line 6 is more than line 7 and you want to make a nondeductible contribution, go to line 8 7. H&r block free online e file 4,100 8. H&r block free online e file Nondeductible contribution. H&r block free online e file Subtract line 7 from line 5 or 6, whichever is smaller. H&r block free online e file  Enter the result here and on line 1 of your Form 8606 8. H&r block free online e file 1,400 What if You Inherit an IRA? If you inherit a traditional IRA, you are called a beneficiary. H&r block free online e file A beneficiary can be any person or entity the owner chooses to receive the benefits of the IRA after he or she dies. H&r block free online e file Beneficiaries of a traditional IRA must include in their gross income any taxable distributions they receive. H&r block free online e file Inherited from spouse. H&r block free online e file   If you inherit a traditional IRA from your spouse, you generally have the following three choices. H&r block free online e file You can: Treat it as your own IRA by designating yourself as the account owner. H&r block free online e file 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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The H&r Block Free Online E File

H&r block free online e file Index A Adjusted basis for installment sale, Adjusted basis for installment sale purposes. H&r block free online e file Assistance (see Tax help) B Basis Adjusted, Adjusted basis. H&r block free online e file Assumed mortgage, Buyer Assumes Mortgage Installment obligation, Basis. H&r block free online e file , Basis in installment obligation. H&r block free online e file , Basis in installment obligation. H&r block free online e file Installment sale, Adjusted basis for installment sale purposes. H&r block free online e file Repossessed property, Basis in repossessed property. H&r block free online e file , Basis. H&r block free online e file Bond, Bond. H&r block free online e file Buyer's note, Buyer's note. H&r block free online e file C Contingent payment sale, Contingent Payment Sale Contract price, Contract price. H&r block free online e file D Dealer sales, special rule, Dealer sales. H&r block free online e file Depreciation recapture income, Depreciation Recapture Income Disposition of installment obligation, Disposition of an Installment Obligation E Electing out, Electing Out of the Installment Method Escrow account, Escrow Account F Fair market value, Fair market value (FMV). H&r block free online e file , Fair market value (FMV). H&r block free online e file Figuring installment sale income, Figuring Installment Sale Income Form 4797, Form 4797, Form 4797. H&r block free online e file 6252, Form 6252, Reporting an Installment Sale 8594, Reporting requirement. H&r block free online e file Schedule D (Form 1040), Schedule D (Form 1040), Other forms. H&r block free online e file , Schedule D (Form 1040). H&r block free online e file Free tax services, Free help with your tax return. H&r block free online e file G Gross profit percentage, Gross profit percentage. H&r block free online e file Gross profit, defined, Gross profit. H&r block free online e file Guarantee, Debt not payable on demand. H&r block free online e file H Help (see Tax help) I Installment obligation Defined, Installment obligation. H&r block free online e file Disposition, Disposition of an Installment Obligation Used as security, Installment Obligation Used as Security (Pledge Rule) Installment Sale, What Is an Installment Sale? Interest Escrow account, Escrow Account Income, Interest Income Reporting, Seller-financed mortgage. H&r block free online e file Unstated, Installment income after 2013. H&r block free online e file Interest on deferred tax, Interest on Deferred Tax Exceptions, Exceptions. H&r block free online e file L Like-kind exchange, Like-Kind Exchange N Note Buyer's, Buyer's note. H&r block free online e file Third-party, Third-party note. H&r block free online e file O Original issue discount, Installment income after 2013. H&r block free online e file P Payments considered received, Payments Received or Considered Received Buyer assumes debts, Buyer Assumes Other Debts Buyer pays seller's expenses, Buyer Pays Seller's Expenses Mortgage assumed, Buyer Assumes Mortgage Pledge rule, Installment Obligation Used as Security (Pledge Rule) Payments received, Payments Received or Considered Received Pledge rule, Installment Obligation Used as Security (Pledge Rule) Publications (see Tax help) R Related person Land sale, Land transfers between related persons. H&r block free online e file Reporting sale to, Related person. H&r block free online e file Sale to, Sale to a Related Person Reporting installment sale, Reporting Installment Sale Income, Reporting an Installment Sale Repossession, Repossession Holding period for resale, Holding period for resales. H&r block free online e file Personal property, Personal Property Real property, Real Property S Sale at a loss, Sale at a loss. H&r block free online e file Sale of Business, Sale of a Business Home, Sale of Your Home Land between related persons, Land transfers between related persons. H&r block free online e file Partnership interest, Sale of Partnership Interest Several assets, Single Sale of Several Assets, Several assets. H&r block free online e file Stock or securities, Stock or securities. H&r block free online e file Sales by dealers, Dealer sales. H&r block free online e file Section 1274, Section 1274 Exceptions, Exceptions to Sections 1274 and 483 Section 483, Section 483 Exceptions, Exceptions to Sections 1274 and 483 Selling expenses, Selling expenses. H&r block free online e file Selling price Defined, Selling price. H&r block free online e file Reduced, Selling Price Reduced Single sale of several assets, Single Sale of Several Assets, Several assets. H&r block free online e file T Tax help, How To Get Tax Help Third-party note, Third-party note. H&r block free online e file TTY/TDD information, How To Get Tax Help U Unstated interest, Installment income after 2013. H&r block free online e file Prev  Up     Home   More Online Publications