IRA deduction limits go up

You can contribute up to $4,000 -- or $5,000 if you're 50 or older -- to a traditional or Roth individual retirement account in 2007.

For 2008, the basic contribution limit will rise to $5,000. For those 50 and over will be able to contribute as much as $6,000, including any catch-up contribution.

Can you deduct it?

Whether you can deduct that contribution depends on your income and the type of IRA. Roth IRAs are funded with after-tax dollars and therefore not deductible. (Their chief appeal is that anything they earn is tax-free when you withdraw the money, unlike a traditional IRA.) Those income levels got a boost this year.

Through your employer's retirement plan, you can take a full deduction for 2007:

• If you're a married couple filing jointly or a qualifying widow or widower and your modified adjusted gross income is more than $83,000 but less than $103,000.

• If you're a single taxpayer or a head of a household and your modified adjusted gross income is more than $52,000 but less than $62,000.

• If you're a spouse filing separately and your modified adjusted gross income is less than $10,000.

A nonworking spouse may make a deductible contribution of $4,000 so long as the couple's adjusted gross income doesn't exceed $156,000.

Deductibility is phased out between $156,000 and $166,000.

2008 deductibility limits

These are the income limits for making deductible IRA contributions in 2008:

• If you're a married couple filing jointly or a qualifying widow or widower, your income must be more than $85,000 but less than $105,000.

• If you're a single taxpayer or a head of a household, your income must be more than $53,000 but less than $63,000.

• If you're a spouse filing separately, your income must be less than $10,000.

A nonworking spouse will be allowed to make a deductible contribution of $4,000 so long as the couple's adjusted gross income doesn't exceed $156,000. Deductibility will be phased out between $159,000 and $169,000.

Published Dec. 6, 2007