What does an ira deduction and ira tax and the ira maximum have in common? Taxes.
The ira maximum contribution is usually increased every year. For 2009 the maximum amount that you can contribute to your ira is $5,000 with an additional $1,000 catch-up contribution if you are over age 50. If you over contribute you are effected when you prepare your tax returns.
An ira tax is imposed when you make an “early withdrawal” from your ira. The IRS considers most withdrawals before age 59 ½ an “early withdrawal”. So to avoid an ira tax, wait until after age 59 ½ to make any withdrawals from your ira account.
With a traditional ira, a few factors effect whether or not you get an ira deduction. Your age and total income for that year for one; and whether or not you have another retirement plan through your work place. An ira deduction allows you to reduce your taxable income for that year.