Traditional IRAs and Roth IRAs: Here’s what’s new for 2008

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The IRS each year issues a very helpful and thorough publication about Individual Retirement Accounts or IRAs. Called Publication 590, the document covers traditional IRAs, Roth IRAs, SIMPLE IRAs and other related issues. The IRS just released its 2007 edition (it comes at the end of the year). It’s available as a pdf, but be warned, it weighs in this year at a hefty 108 pages. You can download it here. It’s also available in an html version here, but I much prefer the pdf version. If you’re not interested in trudging through a 108 page tome, however, here is what’s new for 2008.

Traditional IRA contribution and deduction limit

The contribution limit to your traditional IRA for 2008 will be increased to the smaller of the following amounts:

  • $5,000, or
  • Your taxable compensation for the year.

If you were age 50 or older before 2009, the most that can be contributed to your traditional IRA for 2008 will be the smaller of the following amounts:

  • $6,000, or
  • Your taxable compensation for the year.

Roth IRA contribution limit

If contributions on your behalf are made only to Roth IRAs, your contribution limit for 2008 will generally be the lesser of:

  • $5,000, or
  • Your taxable compensation for the year.

If you were age 50 or older before 2009 and contributions on your behalf were made only to Roth IRAs, your contribution limit for 2008 will generally be the lesser of:

  • $6,000, or
  • Your taxable compensation for the year.

However, if your modified adjusted gross income (AGI) is above a certain amount, your contribution limit may be reduced. For example, if you are married and filing a joint return, you generally cannot contribute to a Roth IRA if your AGI is $169,000 or more in 2008.

Modified AGI limit for traditional IRA contributions increased

For 2008, if you are covered by a retirement plan at work, your deduction for contributions to a traditional IRA is reduced (phased out) if your modified adjusted gross income (AGI) is:

  • More than $85,000 but less than $105,000 for a married couple filing a joint return or a qualifying widow(er),
  • More than $53,000 but less than $63,000 for a single individual or head of household, or
  • Less than $10,000 for a married individual filing a separate return.

If you either live with your spouse or file a joint return, and your spouse is covered by a retirement plan at work, but you are not, your deduction is phased out if your AGI is more than $159,000 but less than $169,000. If your AGI is $169,000 or more, you cannot take a deduction for contributions to a traditional IRA. Note, these limits determine whether you can deduct your IRA contributions, not whether you can make an after-tax IRA contribution.

Modified AGI limit for Roth IRA contributions increased

For 2008, your Roth IRA contribution limit is reduced (phased out) in the following situations.

  • Your filing status is married filing jointly or qualifying widow(er) and your modified AGI is at least $159,000. You cannot make a Roth IRA contribution if your modified AGI is $169,000 or more.
  • Your filing status is single, head of household, or married filing separately and you did not live with your spouse at any time in 2008 and your modified AGI is at least $101,000. You cannot make a Roth IRA contribution if your modified AGI is $116,000 or more.
  • Your filing status is married filing separately, you lived with your spouse at any time during the year, and your modified AGI is more than -0-. You cannot make a Roth IRA contribution if your modified AGI is $10,000 or more.

Modified AGI limit for retirement savings contributions credit increased

For 2008, you may be able to claim the retirement savings contributions credit if your modified adjusted gross income (AGI) is not more than:

  • $53,000 if your filing status is married filing jointly,
  • $39,750 if your filing status is head of household, or
  • $26,500 if your filing status is single, married filing separately, or qualifying widow(er).

Rollovers from other retirement plans

For 2008, you can roll over amounts from an eligible retirement plan into a Roth IRA. Before, you had to roll over amounts to a traditinFor more information, see Rollovers from other retirement plans in chapter 2.

Statement of required minimum distribution

If a minimum distribution is required from your IRA, the trustee, custodian, or issuer that held the IRA at the end of the preceding year must either report the amount of the required minimum distribution to you, or offer to calculate it for you. The report or offer must include the date by which the amount must be distributed. The report is due January 31 of the year in which the minimum distribution is required. It can be provided with the year-end fair market value statement that you normally get each year. No report is required for section 403(b) contracts (generally tax-sheltered annuities) or for IRAs of owners who have died.

Published or Updated: March 23, 2012
About Rob Berger

Rob founded the Dough Roller in 2007. A litigation attorney in the securities industry, he lives in Northern Virginia with his wife, their two teenagers, and the family mascot, a shih tzu named Sophie.

Comments

  1. CiaranFromChance says:

    Hey DR,

    That’s pretty much everything you’ll need to know for 2008 when it comes to your IRA’s.

    First time here. I really like the site, looks like we share a few common interests, maybe more than a few:)

    Will be coming by a lot more often in the future, I think your blog will be a great source of inspiration for me.

  2. DianeP says:

    Did you know you can invest in real estate inside your IRA or Solo 401(k) just as you can traditional assets?

    Millennium Trust Company (http://www.mtrustcompany.com/services/ira/real.asp) located in Oak Brook, IL, custodies real estate in self directed IRAs and solo 401(k)s. They can walk you thru the process. Try contacting Sandra Reese at [email protected] for more info.

  3. Linda says:

    I just came into about $15000. Both of my parents are deceased and I plan to apply for financial aid for college. What is the best way to invest this money?

    • DR says:

      Linda, it’s impossible to give you a meaningful response without some more information. Can you tell us your age, what you eventually plan to do with the money, and how long you plan to invest it.

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