EVEN ACCOUNTANTS can't keep track of the rules for IRA contributions. If you're married and your spouse is in a retirement plan, but you're not in a plan and you receive disability and your dog has medical insurance.... You get the idea.
So, to clear up the confusion, just plug your numbers into our worksheet. It will tell you exactly which IRA contribution options are available to you and how much you can contribute. Make sure your responses relate to the tax year for which you wish to make the IRA contributions. Remember, you can make an IRA contribution for the 2012 tax year anytime between Jan. 1, 2012 and April 15, 2013. So if you are interested in finding out what you can contribute for 2012, your responses (level of modified adjusted gross income, tax filing status, etc.) must relate to that year even though your actual contribution could be as late as April 15, 2013.
There are three types of IRAs to which you may contribute, provided you meet all the qualification rules. They are traditional deductible IRAs, traditional nondeductible IRAs and nondeductible Roth IRAs. The eligibility rules are different for each of the above, and that's why you need this worksheet.
For tax years 2011 and 2012, you can generally contribute a total of no more than $5,000 to IRAs set up in your name. Ditto for your spouse. However, if you will be age 50 or older at yearend, your maximum contribution is increased by $1,000 to $6,000. You can spread that $5,000 (or $6,000) among different IRA accounts to which you are eligible to contribute.
To find out more about the eligibility and withdrawal rules for each IRA, see our IRA Primer. And to find out which IRA will provide the best after-tax return in your situation, try the calculator in our story Which IRA Is Best?
If you are nearing retirement, you should note that you cannot contribute to a traditional deductible or nondeductible IRA for the year you turn 70 1/2 or for any subsequent year. You can however contribute to a Roth IRA regardless of your age, as long as you meet the Roth contribution guidelines. Roth accounts have additional estate planning advantages that might also interest older and wealthier savers.
Warning: This worksheet is not set up to help you figure out what you could contribute to a simplified employee pension (SEP) account. SEP accounts are often called SEP-IRAs, because the tax rules for SEP withdrawals are the same as for traditional deductible IRAs. However, SEPs are intended as tax-deferred retirement plans for self-employed individuals and small employers. For the same reason, this worksheet does not cover Simple IRAs. For more on SEPs and Simple IRAs, see our IRA Primer and our feature on Small Business Retirement Accounts.