Get to Know the IRA Deduction Facts

If you are thinking about contributing to an IRA, or individual retirement account, then you should know the facts before you start contributing. First, it needs to be a traditional IRA account. You will also need to understand what the IRA contribution limits are and what the rules and regulations are that you need to meet before you can receive the deduction on your taxes.

Prior to contributing you need to understand what amount you can contribute. When your less that forty nine years old or younger the amount is $5, 000. When you are fifty years or older than the amount is $6,000. You can't be more than 70 1/2 years old by the end of that tax year to contribute. The 2010 IRA contribution limits are yet to be released. Also, any taxable alimony or separate maintenance payments received are considered compensation for IRA purposes.

You must also meet the deadlines. When you contribute by April 15th you can consider it retroactive for the prior year. You can only do this if you haven't filed an extension.

In order to claim the IRA deduction on your tax forms you will need to put it on line 32 for the Form 1040. For the form 1040A it will be put on line 17. You cannot use any payments made to Roth IRA accounts, just traditional accounts.

There are also phaseout limits on the deductible portion of your contributions. You should ask the person that prepares your taxes about the details for this. When you know how much to deduct you can plan your contributions easier.

Before you do anything else you need to make sure that the account your are contributing to is tax deductible. Don't make the mistake that so many people do by putting money in the wrong type of account. This will prevent you from losing money and making mistakes. An IRA account is a great way to save money on your taxes.