Traditional IRA (2004 IRS FAQ)

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IRS FAQ 17.4 Individual Retirement Arrangements (IRAs): Traditional IRA

I want to establish a traditional individual retirement arrangement (IRA) for my spouse, and I need additional information. What is the most I can contribute to a spousal IRA during the tax year?

If both you and your spouse work and both have taxable compensation, each of you can contribute up to $3,000 (or the amount of each IRA owner's compensation, if less) to a separate traditional IRA. Even if one spouse has little or no compensation, up to $3,000 can be contributed to each IRA if combined compensation is at least equal to the amount contributed to both IRAs and you file a joint return. You can contribute $3,000 to a separate IRA for your nonworking spouse if you file a joint return. Your total contribution to both your IRA and the spousal IRA for this year is limited to the smaller of $6,000, or your taxable compensation reduced by any contributions you make to a traditional IRA or Roth IRA. You cannot contribute more than $3,000 to either IRA for the year. If you are 50 or older in 2004, the most that can be contributed to your traditional IRA for 2003 is the lesser of:

. $3,500 (up from $2,000), or

. Your compensation that you must include in income.

For additional information, refer to Individual Retirement Arrangements (IRAs), Individual Retirement Arrangements (IRAs), or Publication 590, Individual Retirement Arrangements (IRAs) .


Can I take an IRA deduction for the amount I contributed to a 401(k) plan last year?

No. A 401(k) plan is not an IRA. However, the amount you contributed is not included as income in box 1 of your W-2 form so you don't pay tax on it for 2004. For more information, refer to 401(k) Plans, 401(k) Plans, Publication 575, Pension and Annuity Income, or Publication 560, Retirement Plans for Small Business.



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