On March 31, 2018, Candia reaches age 70 1/2. What is the maximum contribution amount that...

On March 31, 2018, Candia reaches age 70 1/2. What is the maximum contribution amount that she can make to her traditional IRA if she has earned income of approximately $20,000 in both 2017 and 2018 tax year’s?

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Expert Solution

As per the traditional IRA rules related to age limit for contribution to IRA :

For a Traditional IRA, once you reach the year in which you turn age 70 1/2 you are no longer eligible to make a Traditional IRA contribution. Therefore, the year in which you turn 70 1/2, you cannot make contributions to the IRA for that year.

So, looking at the above problem, Candia turn 70 1/2 in the year 2018 so she cannot make the contribution in the year 2018. However, for the year 2017 she is eligible to make contributions to IRA.

Now, for the limits of contributions we must note that the taxable compensation for each year is $ 20,000. The limit of contribution to IRA is as follows:

For 2015, 2016, 2017 and 2018, the total contributions to traditional IRA cannot be more than:

$5,500 ($6,500 if you’re age 50 or older), or
your taxable compensation for the year, if your compensation was less than this dollar limit.

So, as per above provision the contribution shall be $ 6,500 for the tax year 2017 and zero for the year 2018

ekkarill92 answered 1 year ago

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