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 2009 and 2010
The limits for 2010 have now been released by the IRS and they are the same as 2009 because the cost-of-living index has not increased. Also, 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. Taxable compensation can be salary, wages, commissions, alimony payments and self-employment income.
IRA Contributon Limits
The traditional Individual Retirement Account (IRA) contribution and deduction limit is $5,000 for 2009. If you are at least age 50 or older before the end of 2009, 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 2009 Federal Income Tax Return. Income for these purposes is defined as Modified Adjusted Gross Income.
■ 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 $89,000 on a joint tax return. If you make $109,000 or more on a joint tax return, you receive no IRA deduction.
■ 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 $166,000. At $176,000, 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 $55,000 and completely eliminated when you hit $65,000.
For 2010 the above income limits have been changed as follows: The $166,000 amount has been increased to $167,000 for 2010. The $55,000 amount has been increased to $56,000 for 2010. All other amounts are unchanged for 2010.
