IRA Traditional IRA Tax Rules and Deductibility 1 — Questions and Answers
Question 1: What is the standard IRA contribution limit for individuals under age 50 in 2024?
- $5,500
- $6,000
- $6,500
- $7,000 (Correct answer)
Correct answer: $7,000
The IRS raised the annual IRA contribution limit to $7,000 for 2024 for individuals under age 50.
Question 2: What is the catch-up contribution amount allowed for individuals age 50 and older in 2024?
- $1,000 (Correct answer)
- $1,500
- $2,000
- $3,000
Correct answer: $1,000
Individuals aged 50 and older may contribute an additional $1,000 catch-up contribution, bringing their 2024 total limit to $8,000.
Question 3: As of 2020, what is the maximum age at which you can make traditional IRA contributions?
- 70½
- 72
- 73
- There is no age limit (Correct answer)
Correct answer: There is no age limit
The SECURE Act of 2019 eliminated the prior age 70½ cutoff for traditional IRA contributions, effective January 1, 2020.
Question 4: What is the tax treatment of investment earnings inside a traditional IRA?
- Tax-free growth
- Tax-deferred growth (Correct answer)
- Taxed annually as ordinary income
- Subject to capital gains tax each year
Correct answer: Tax-deferred growth
Earnings inside a traditional IRA grow tax-deferred, meaning taxes are not owed until funds are withdrawn.
Question 5: What is the deadline for making an IRA contribution that counts toward the prior tax year?
- December 31 of the tax year
- January 31 of the following year
- The tax filing deadline (April 15) of the following year (Correct answer)
- October 15 of the following year
Correct answer: The tax filing deadline (April 15) of the following year
IRA contributions for a given tax year may be made up to the tax filing deadline of April 15 of the following year, without extensions.
Question 6: Which form must be filed to track non-deductible traditional IRA contributions?
- Form 5329
- Form 8606 (Correct answer)
- Form 1040-SR
- Form W-2P
Correct answer: Form 8606
Form 8606 is used to record non-deductible IRA contributions and to calculate the taxable portion of future distributions using the pro-rata rule.
Question 7: Which of the following is the primary factor that determines whether a traditional IRA contribution is tax-deductible?
- The IRA custodian selected
- Whether the taxpayer or spouse is covered by a workplace retirement plan (Correct answer)
- The taxpayer's credit score
- The state in which the taxpayer resides
Correct answer: Whether the taxpayer or spouse is covered by a workplace retirement plan
Deductibility of traditional IRA contributions phases out for individuals (or their spouses) who are active participants in an employer-sponsored retirement plan above certain MAGI thresholds.
IRA Traditional IRA Tax Rules and Deductibility 1
What is the standard IRA contribution limit for individuals under age 50 in 2024?