So now you know the "basics" of IRA information. You know what an IRA is, and you know what types of IRAs are out there. But are you ready to choose the type of IRA that best suits your needs? Not quite yet! In this article we will move you closer to that decision by addressing your eligibility for each kind of IRA and the amount of money you are allowed to put into each of those IRAs.

We realize this stuff can sound like a never-ending flow of technical mumbo-jumbo, but stick with us! If you approach this one step at a time, it will all make sense.

Traditional IRA Eligibility and Deductibility
If you are under the age of 70 ½ and have an earned income, you are eligible to contribute to a Traditional IRA.

The question now is how much of each contribution is tax-deductible? That depends first on whether or not you or your spouse (if you are filing jointly) has participated in an employer's retirement plan in the current year. If neither of you have, you're in the clear! Regardless of your adjusted gross income (AGI), your full contribution will be tax-deductible.

If you or your spouse has participated in an employer's retirement plan, your contributions may be tax deductible, depending on your AGI.

Here are the basic deductibility rules for Traditional IRAs in 2009:

If you are single and have not participated in an employer's retirement plan …

• …you can deduct 100% of your allowable contributions.

If you are married and neither you nor your spouse has participated in an employer's retirement plan …

• …you can deduct 100% of your allowable contributions.

If you are single and have participated in an employer's retirement plan …

• … and your AGI is $53,000 or less, you can deduct 100% of your allowable contributions.
• … and your AGI is between $53,000 and $63,000, you can deduct a portion of your allowable contributions.
• … and your AGI is more than $63,000, you cannot deduct any portion of your allowable contributions.

If you are married, are filing jointly and you or you and your spouse have participated in an employer's retirement plan …

• … and your combined AGI is $85,000 or less, you can deduct 100% of your contributions.
• … and your combined AGI is between $85,000 and $105,000, you can deduct a portion of your contributions.
• … and your combined AGI is more than $105,000, you cannot deduct any portion of your contributions.

If you are married, are filing jointly and you have not participated in an employer's retirement plan, but your spouse has …

• … and your combined AGI is $159,000 or less, you can deduct 100% of your contributions.
• … and your combined AGI is between $159,000 and $169,000, you can deduct a portion of your contributions.
• … and your combined AGI is more than $169,000, you cannot deduct any portion of your contributions.

If you are married and you are filing separately …

• … and your AGI is $0, you can deduct 100% of your contributions.
• … and your AGI is between $0 and $10,000, you can deduct a portion of your contributions.
• … and your AGI is more than $10,000, you cannot deduct any portion of your contributions.

Next: Roth IRA Eligibility

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