Taxable compensation can be salary, wages, commissions, alimony payments and self-employment income.
It does not include things like interest and dividend income; rental income: social security income; and pension or annuity income.
Self-employment income is the net self-employment income after deducting business expenses -- not the gross revenue from the business.
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IRA Deduction Limits For 2012 and 2011
The limits for 2012 have been released and they are the same as 2011 -- no increase.
Your IRA deduction does not include any part of a tax-free rollover to your IRA account. You also must have at least $5,000 or $6,000 in taxable compensation to be able to contribute the maximum amounts.
The traditional Individual Retirement Account (IRA) contribution and deduction limit is $5,000 for 2011. If you are at least age 50 or older before the end of 2011, the limits are increased to $6,000.
Even though you may legally contribute to your IRA, your income must not be over certain amounts in order to deduct the entire amount on your 2011 Federal Income Tax Return.
Income for these purposes is defined as Modified Adjusted Gross Income.
IRA Contributon Limits
■ If you and your spouse; or if you are single; or if you claim head of household status and were not covered by a retirement plan at your work, there are no income restrictions. Your entire IRA contribution is tax deductible.
■ If both you and your spouse are covered by a retirement plan, your IRA deduction will be phased-out if you make more than $90,000 on a joint tax return. If you make $110,000 or more on a joint tax return, you receive no IRA deduction.
For 2012, the above $90,000 limit is increased to $92,000 and the $110,000 limit is increased to $112,000.
The $169,000 limit is increased to $173,000 and the $179,000 is increased to $183,000.
For 2012, the $56,000 limit is increased to $58,000 and the $66,000 limit is increased to $68,000.
Learn how a Simplified Employee Pension (SEP-IRA) plan works for your small business and your employees.
Profit Sharing & Money Purchase Plans. The yearly contribution can be variable or a fixed percentage.
Defined Benefit Plans. This can be perfect for a high income sole owner business -- very large tax deductions.
IRA Rollovers. Find out how you can take assets from one IRA and rollover tax-free to a new IRA; or make a direct tax-free transfer to the new IRA.
Small Business 401k. You can have a 401k for your small business even if you are self-employed or a sole owner.
Choosing mutual funds is not easy .... read more »
More investment choices including real estate.
They are complicated but important.
Learn if you need a Checkbook LLC for your self-directed IRA.
How much can I contribute to my 401k?
How much can I put into my IRA and how much can I deduct on my tax return?
How does a Roth IRA work and what are the income limits for my yearly contribution?
■ If one spouse is covered by a retirement plan and the other is not covered by a retirement plan, your IRA deduction is not reduced until your income exceeds $169,000. At $179,000, your IRA deduction is completely phased out.
■ If you are single or claim head of household status and are covered by a retirement plan, your IRA deduction is reduced when your income exceeds $56,000 and completely eliminated when you hit $66,000.
Things you must consider before you invest your retirement money.... read more »
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