Premiere Select
®
IRA contribution guide
Traditional IRA contributions
• Anyone under age 701⁄2 who has U.S. earned compensation1 can contribute up to the contribution limit as indicated in the Current and Future Year IRA Contribution Limits table below, or 100% of compensation, whichever is less, per tax year, to a Traditional IRA. You must be 18 years of age or older to open a Premiere Select IRA. • A spouse may also contribute up to the contribution limit or 100% of the couple’s combined compensation per tax year, whichever is less, to a separate Traditional IRA (Spousal IRA), as long as he/she files a joint income tax return. • Married Individuals filing a joint federal income tax return may contribute up to the contribution limit to both a Traditional IRA and a Spousal IRA, as long as the combined annual contributions to both IRAs does not exceed twice the contribution limit or 100% of the couple’s combined compensation, whichever is less. • Contributions can be made to both a Traditional IRA and a Roth IRA, but the combined total contribution cannot exceed the contribution limit per tax year or 100% of compensation per tax year, whichever is less.
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Compensation is generally income reported on Form W-2
Year: 2001 2002 – 2004 2005 2006 – 2007 2008**
Current and future year IRA contribution limits Annual contribution limit: Additional catch-up contribution for people age 50 and older*: $2,000 none $3,000 $500 $4,000 $500 $4,000 $1,000 $5,000 $1,000
*You must be projected to reach age 50 or older by 12/31 of the tax year to which the contribution relates. **Annual contribution will be indexed for inflation in $500 increments thereafter.
Deductibility of Traditional IRA contributions
• Contributions may be fully or partially tax deductible depending on the individual’s Adjusted Gross Income (AGI) and whether or not he or she is an active participant in an employer-sponsored retirement plan. • If an individual is not an active participant in an employer-sponsored plan, a fully deductible contribution (up to the annual contribution limit) can be made regardless of AGI. • For a married couple filing jointly, if neither is an active participant in a plan, a fully deductible contribution can be made regardless of AGI. • If a married couple includes an active participant, then the non-participating spouse may contribute a fully deductible contribution (up to the annual contribution limit), if the couple’s AGI is less than $150,000. • If both spouses are active participants, their AGI must be less than the amount shown in the table on the next page ($53,000 for 2002) in order to qualify for fully deductible contributions for both. • Individuals should complete IRS Form 8606 for each year in which a non-deductible Traditional IRA contribution is made, as well as each year a distribution is taken from any IRA that held any non-deductible contributions. (Please note that IRS Form 8606 may also need to be filed with the IRS under other circumstances.)
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Banc of America Investment Services, Inc. is a registered broker-dealer, member NASD and SIPC and a nonbank subsidiary of Bank of America, N.A. Banc of America Investment Services, Inc. is not a tax adviser. We suggest you consult your personal tax adviser before making tax-related investment decisions. National Financial Services LLC, Member NYSE, SIPC 00-25-2896B 08-2004
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221239 IRAGUIDE (10/02)
Year: 2002 2003 2004 2005+
Contributions are fully deductible if AGI is: Under $34,000 Under $40,000 Under $45,000 Under $50,000
Single tax filers Contributions are partially deductible if AGI is: $34,000 – $44,000 $40,000 – $50,000 $45,000 – $55,000 $50,000 – $60,000
Contributions are not deductible if AGI is: Over $44,000 Over $50,000 Over $55,000 Over $60,000
Married couples filing jointly Contributions are fully Contributions are partially Contributions are not deductible if AGI is: deductible if AGI is: deductible if AGI is: 2002 Under $54,000 $54,000 – $64,000 Over $64,000 2003 Under $60,000 $60,000 – $70,000 Over $70,000 2004 Under $65,000 $65,000 – $75,000 Over $75,000 2005 Under $70,000 $70,000 – $80,000 Over $80,000 2006 Under $75,000 $75,000 – $85,000 Over $85,000 2007+ Under $80,000 $80,000 – $100,000 Over $100,000 • For married couples filing separate returns with AGI of $10,000 or more, neither individual is eligible to make a deductible IRA contribution if either spouse is an active participant in an employer-sponsored retirement plan. Married couples filing separately who live apart for the entire year are treated as single filers for purposes of determining annual deductible IRA contribution limits. • Any individual, married or single, who is not eligible to make deductible IRA contributions, may make non-deductible IRA contributions up to the contribution limit per tax year, regardless of AGI or participation in an employer-sponsored retirement plan. Year:
Roth IRA contributions
• In general, anyone who has U.S. earned compensation, with an Adjusted Gross Income that does not exceed the limits noted below can contribute up to the annual contribution limit1 or 100% of compensation, whichever is less, per tax year to a Roth IRA. You must be 18 years of age or older to open a Premiere Select Roth IRA. • Individuals may make contributions after reaching age 701⁄2 . • Contributions can be made to both a Traditional IRA and a Roth IRA, but the combined total contribution to an individual’s Traditional and Roth IRAs cannot exceed the annual contribution limit1 or 100% of compensation per tax year,whichever is less. • A spouse can also contribute up to the maximum contribution limit1 to a Roth IRA (Spousal IRA) per tax year as long as he or she files a joint federal income tax return and the couple’s combined AGI does not exceed the limits below. • A married individual who files a separate federal income tax return can contribute to a Roth IRA if his/her AGI is $10,000 or less. (Married individuals who file separately and live apart for the entire tax year are treated as individuals for determining eligibility to contribute or convert to a Roth IRA.) Adjusted Gross Income (AGI) Single: $95,000 or less $95,001 – $109,999 $110,000 and over Married filing joint return: $150,000 or less $150,001 – $159,999 $160,000 and over
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Annual contribution limits1 Contribution limit $MAGI2 – $95,000 X Contribution Limit1 15,000 per year Not eligible to make a Roth IRA contribution Contribution limit $MAGI2 – $150,000 X Contribution Limit1 10,000 per year Not eligible to make a Roth IRA contribution
Refer to the current and future year IRA contribution limits table on page 1, for your annual contribution limit. MAGI = Modified Adjusted Gross Income. Please consult your tax advisor. You may round up your reduced contribution limit to the nearest $10.
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Conversions to a Roth IRA
In addition to making annual contributions to a Roth IRA, an individual (or married couples filing a joint return) may also convert, subject to the Adjusted Gross Income limit below, existing Traditional IRA, Rollover IRA, SEP-IRA, or SIMPLE IRA (after the two-year holding period expires) assets to a Roth IRA. • Individuals or married couples filing a joint tax return with Adjusted Gross Income of $100,000 or less in the year of the conversion can convert either all or part of another IRA to a Roth IRA. The AGI limit applies to the taxable year that the assets are distributed from the non-Roth IRA, not the year in which the assets are contributed to the Roth IRA, if different. • When converting another IRA to a Roth IRA, the IRA owner is required to pay taxes on any taxable converted amount, (i.e., deductible contributions and any investment earnings). • Conversions can be made either via a 60-day rollover or via a trustee-to-trustee transfer. • The conversion assets are excluded from Adjusted Gross Income in determining if an individual meets the $100,000 AGI limit for the conversion.* • Married couples filing separate federal income tax returns are not eligible to convert unless they have lived apart for the entire tax year. • If taxes are to be withheld from the conversion amount, the amount withheld may be subject to a 10% early distribution penalty (unless an exception applies). The amount withheld is also taken into account in determining your AGI for conversion eligibility.
* Note: For taxable years beginning on or after January 1, 2005, an individual’s Required Minimum Distribution (RMD) amount is excluded from AGI when determining conversion eligibility.
SEP-IRA contributions
• Contributions to SEP-IRAs are made by the employer into a SEP-IRA established by the employee and are generally tax-deductible to the business. • The employer can make an annual contribution of up to 25% of each eligible employee’s compensation based on the first $200,000 (as indexed thereafter) of employee compensation – for a maximum contribution of $40,000 (per IRC Section 415(c)(1)(a)). • Employer contributions must be uniform among all employees including the employer. The employer may vary his/her contribution percentage each year from 0-25%. Variations in employer contributions must be disclosed to employees. • Employer’s SEP contributions are generally treated as an exclusion from the employee’s income and are not reported on the employee’s W-2 form.
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