How do IRA contributions affect my taxes?

Answer by  Att4372 (1704)

Contributions to a traditional IRA reduce your AGI (Adjusted Gross Income) and lower your taxes. Your contribution must be made by April 15 following the tax year to be deductable. Contributions to a Roth IRA do NOT reduce AGI and do not lower your current taxes.

Answer by  Chaneygirl (1755)

If your contribution is to a Roth IRA, then it is not a deduction. If it is to a traditional IRA, then up to $5,000 ($6,000 if 50 or older). It may be limited if your income is over $55,000 (single) or $89,000 (married) and you are covered by a retirement plan at work (2009 limits).

Answer by  technogeek (6640)

IRA contributions are tax deductible up to $2000 per year, and you can make deductions into the new year and use them for the previous year's contributions.

Answer by  Kdm (180)

Traditional IRAs are deductible up to $5000 if you meet the qualifications. Roth IRAs are not tax deductible contributions, rather they are tax free withdraws(with certain qualifications).

Answer by  tamarawilhite (17883)

There is no tax deduction for contributions to a Roth IRA. Depending on income level, you can deduct up to $3,000 put into a traditional IRA.

Answer by  Kurt (4579)

Contributions to your IRA reduce your taxable income and is used in calculating your adjusted gross income. It is not really a deduction ( such as medical expenses ).

Answer by  nkhill (73)

IRA contributions are an "above the line" deduction that adjusts (lowers) your adjusted gross income. Not all IRA contribtuions are deductable as they phase out based on higher incomes, earned income requirements and if you are in an employer qualifed retirement plan. A spouse with no earned income may be able to use their spouses earned income to qualify.

Answer by  tamarawilhite (17883)

If it is a traditional IRA, you can deduct that amount off your income taxes. If it is a Roth IRA or Roth 401K contribution, the money comes out of your post-tax income and does not reduce your income taxes. However, Roth accounts mature tax free and withdrawals for retirement are income tax free.