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Traditional IRAs are more attractive than ever because expanded income limits
mean more people will be able to make tax-deductible contributions.
In addition, penalty-free withdrawals are allowed for qualified
higher-education expenses and for a first-time home purchase.
Contributions to the Roth IRA or Education IRA (now known as the Coverdell Education
Savings Account) aren't tax-deductible, but the accounts offer
the opportunity for tax-free earnings.
Your tax adviser can offer more guidance on which type of IRA may be
best for your needs. Of course, we are always here to answer
your questions and assist you in opening an IRA. Please
stop by or call us today for more information
on the benefits of a credit union IRA.
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| Who Can Contribute?
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Anyone under age 70½ who has income from compensation (or who is filing jointly with a spouse who earns compensation)
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Anyone who earns compensation (or who is filing jointly with a spouse who earns compensation) with the following modified adjusted gross income:
- Up to $95,000 (single filers)
- Up to $150,000 (joint filers)
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You can contribute the full amount if you are a:
Single filer with modified adjusted gross income (MAGI) up to $95,000
Joint filer with MAGI up to $190,000 |
| How much can I contribute? |
If you meet the eligibility tests described above and you are under age 50, you can contribute up to $4,000 for 2005 through 2007.
For owners age 50 and older, your limits increase to $4,500 for 2005, and $5,000 for 2006 and 2007.
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If you meet the eligibility tests described above and you are under age 50, you can contribute up to $4,000 for 2005 through 2007.
For owners age 50 and older, your limits increase to $5,500 for 2005, and $5,000 for 2006 and 2007.
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The total contributions each year to each child's Coverdell ESA cannot exceed $2,000.
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| What are the tax benefits*?
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Many people can deduct contributions on their tax returns.
All earnings are tax-deferred.
Taxable distributions of earnings are penalty-free for a first time home purchase**, certain higher-education expenses and large medical costs.
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Contributions are non-deductible but qualified distributions are tax-free.
Taxable distributions of earnings are penalty-free for a first-time home purchase**, certain higher-education expenses and large medical costs.
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Withdrawals for certain qualified education expenses are tax-free
Special-needs beneficiaries can withdraw funds tax-free to pay for qualified
education expenses at any age
Qualified education expenses may include
tuition, fees, books, computer equipment and technology required
for elementary, secondary and post-secondary education
A beneficiary may receive tax-free distributions
from an Education IRA in the same year he or she claims the Lifetime
Learning or HOPE Scholarship tax credits
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* list not all-inclusive
** Lifetime limit for exemption on a first-time home purchase is $10,000 per person.
*** Coverdell Education Savings Account
Note: This chart is for general information only and is not intended to provide specific advice or recommendations for individuals. We suggest you contact your tax advisor in regards to your personal IRA plan.
Revised 04/06 |
