Taxpayer asks:
What’s the maximum contribution to an IRA for 2008? What about 2009? What happens if I go over?
Taxgirl says:
Argh! Retirement plan questions are tough because they’re so fact specific. Here are the general rules as they relate to IRA contributions:
If you are under 50 years of age at the end of 2008, the maximum contribution for your traditional or Roth IRA is the smaller of $5,000 or the amount of your taxable compensation for 2008. This is the limit for all IRA contributions.
If you are 50 years of age or older at the end of 2008, the maximum contribution for your traditional or Roth IRA is the smaller of $6,000 or the amount of your taxable compensation for 2008. Again, this is the limit for all IRA contributions.
The IRA contribution limits for 2009 are the same as for 2008.
If contributions to your IRA are more than the limit, you can apply the excess contribution to a later year if your contributions for that later year are less than allowed. Otherwise, if you don’t take out the extra contributions by the due date for your return, you’re subject to a 6% tax. There are some tricky bits here, so exercise caution. The easiest thing to do is to plan not to overcontribute. If you do, check in with a tax professional as quickly as possible so that you can mitigate your situation.
Like any good lawyer, I need to add a disclaimer: Unfortunately, it is impossible to give comprehensive tax advice over the internet, no matter how well researched or written. Before relying on any information given on this site, contact a tax professional to discuss your particular situation.
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