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Traditional IRA
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Roth IRA
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Who is eligible?
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- Any person, regardless of age, with earned income
- A nonworking spouse who files a joint return that includes earned income
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- Any person, regardless of age, who meets the modified adjusted gross income (MAGI) limits for 2023 or 2024
- A nonworking spouse who files a joint return that includes earned income and whose MAGI is less than $228,000 for 2023 or $240,000 for 2024
2023 income eligibility
Single filer, with MAGI of:
$138,000 or less — full contribution
$138,001–$152,999 — partial contribution
$153,000 or more — not eligible
Joint filers, with MAGI of:
$218,000 or less — full contribution
$218,001–$227,999 — partial contribution
$228,000 or more — not eligible
Married, filing separately, with MAGI of:
$0–$9,999 — partial contribution
$10,000 or more — not eligible
2024 income eligibility
Single filer, with MAGI of:
$146,000 or less — full contribution
$146,001–$160,999 — partial contribution
$161,000 or more — not eligible
Joint filers, with MAGI of:
$230,000 or less — full contribution
$230,001–$239,999 — partial contribution
$240,000 or more — not eligible
Married, filing separately, with MAGI of:
$0–$9,999 — partial contribution
$10,000 or more — not eligible
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Maximum annual contribution
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2023
The lesser of 100% of taxable compensation or $6,500 ($1,000 catch-up contribution for owners age 50 or older)
2024
The lesser of 100% of taxable compensation or $7,000 ($1,000 catch-up contribution for owners age 50 or older)
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Same as traditional IRA, subject to eligibility restrictions based on MAGI as noted in Who is eligible? above
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Deductible contributions
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2023
Single filer, covered by a retirement plan at work, with MAGI of:
$73,000 or less — fully deductible
$73,001–$82,999 — partially deductible
$83,000 or more — nondeductible
Single filer, not covered by a plan at work:
Married, filing separately, covered by a retirement plan at work, with MAGI of:
$0–$9,999 — partial contribution
$10,000 or more — not eligible
Married, filing separately, not covered by a retirement plan at work, with MAGI of:
$0–$9,999 — partial contribution
$10,000 or more — not eligible
Joint filer, covered by a plan at work, with MAGI of:
$116,000 or less — fully deductible
$116,001–$135,999 — partially deductible
$136,000 or more — nondeductible
Joint filer, only a spouse is covered by a plan at work, with MAGI of:
$218,000 or less — fully deductible
$218,001–$227,999 — partially deductible
$228,000 or more — nondeductible
Joint filer or married, filing separately, neither spouse is covered by a plan at work:
2024
Single filer, covered by a retirement plan at work, with MAGI of:
$77,000 or less — fully deductible
$77,001–$86,999 — partially deductible
$87,000 or more — nondeductible
Single filer, not covered by a plan at work:
Married, filing separately, covered by a retirement plan at work, with MAGI of:
$0–$9,999 — partially deductible
$10,000 or more — nondeductible
Married, filing separately, not covered by a plan at work (but spouse is covered), with MAGI of:
$0–$9,999 — partially deductible
$10,000 or more — nondeductible
Joint filer, covered by a plan at work, with MAGI of:
$123,000 or less — fully deductible
$123,001–$142,999 — partially deductible
$143,000 or more — nondeductible
Joint filer, not covered by a plan at work (but spouse is covered), with MAGI of:
$230,000 or less — fully deductible
$230,001–$239,999 — partially deductible
$240,000 or more — nondeductible
Joint filer or married, filing separately, neither spouse is covered by a plan at work:
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None of the contribution is tax-deductible.
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Tax credit for contributions
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Eligible taxpayers can claim a nonrefundable Saver’s Credit for contributions.
The maximum credit allowed is 50% of the annual contribution amount, not to exceed $2,000.
2023
Eligible taxpayers are:
Joint filers with MAGI of up to $73,000
Heads of household with MAGI of up to $54,750
Single filers with MAGI of up to $36,500
2024
Eligible taxpayers are:
Joint filers with MAGI of up to $76,500
Heads of household with MAGI of up to $57,375
Single filers with MAGI of up to $38,250
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Same as a traditional IRA
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Federal income tax treatment on contributions
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Taxes are deferred until distributions are made; taxable portions of distributions are taxed as ordinary income.
If nondeductible contributions have been made, each distribution is treated as coming proportionately from the taxable and nontaxable portions.
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Contributions are made with after-tax money; therefore, distributions from the contribution amount (basis amount) are always tax-free.
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Federal income tax treatment on earnings
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Earnings grow tax-deferred until distributions begin. Distributions are treated as ordinary income.
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Qualified distributions are tax-free (see Distributions below for definition of qualified distributions).
Nonqualified distributions — Earnings are taxed as ordinary income.
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Conversions
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Conversion to a Roth IRA is allowed regardless of MAGI or tax-filing status. The converted amount is taxed as income, but no penalty applies.
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Clients can convert from:
Traditional IRA
SARSEP
SEP IRA
- SIMPLE IRA (may only be converted starting 2 years after the client’s first contribution)
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Rollovers
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To employer-sponsored plans — Pretax contributions can be rolled over to a 401(k) or to another qualified plan, as well as to 403(b) and 457(b) plans. However, the receiving plan must accept IRA rollovers.
From employer-sponsored plans — Eligible pretax and after-tax distributions from qualified plans, as well as from 403(b) and 457(b) plans, can be rolled over.
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From employer-sponsored plans — Eligible pretax and after-tax distributions from qualified plans, as well as from 403(b) and 457(b) plans, can be rolled over.
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Distributions
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Distributions can be taken after age 59½ without penalty.
Premature distributions are subject to a 10% tax penalty. The Internal Revenue Service (IRS) early distribution penalty does not apply if the distribution falls under certain exceptions.
Some (but not all) examples of distributions that are exceptions to the early distribution penalty include:
Beneficiary distributions
Disability distributions
Substantially equal periodic payments
- Birth or adoption expenses*† (Distributions must be made within one year after the birth or adoption date and are limited to $5,000 across an investor’s accounts per birth or adoption.)
Certain medical expenses*
Health insurance premiums during unemployment*
- First-time home purchase expenses (up to $10,000 per individual)*
Qualified higher education expenses*
Qualified reservist distributions*
Distributions made while terminally ill*†
- Distributions made in connection with federally declared disasters (up to $22,000 per individual)*†
- Distributions for unforeseeable or immediate financial needs related to necessary personal or family emergency expenses (up to the lesser of $1,000 or the excess of your account balance over $1,000)*†
- Distributions due to domestic abuse (up to the lesser of $10,000 as adjusted for inflation or 50% of the account balance)*†
* Capital Group does not require documentation on these distributions. If made before age 59½, they are reported to the IRS as early distributions with no known exception (IRS Code 1) on Form 1099-R. Consult a tax advisor to determine whether a distribution falls under a particular exception.
† If your client wants to repay all or part of the distribution back to their IRA, they must do so within 3 years of the date they received the distribution.
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Distributions from contributions can be made at any time without taxes or penalty.
Distributions from earnings are tax-free if the initial contribution to the account was made at least 5 years ago and the IRA owner meets one of the following exceptions:
Payments made to the IRA owner’s beneficiaries after the owner’s death and after the 5-year period are also tax- and penalty-free. Payments of earnings made before the end of the 5-year period are penalty-free.
For other distributions, earnings are taxable but not subject to the 10% penalty, as long as the IRA owner qualifies for an exception. The exceptions are the same as those for traditional IRAs.
Distributions from a conversion amount must satisfy a 5-year investment period to avoid the 10% penalty. This rule pertains only to the conversion amount that was treated as income for tax purposes.
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Required minimum distributions (RMDs)
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These distributions are required annually starting the year the owner reaches age 73.
See the Required Minimum Distribution (RMD) Guide.
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There is no required minimum distribution during the Roth IRA owner’s lifetime.
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