Common use of Nondeductible Contributions Clause in Contracts

Nondeductible Contributions. Regardless of whether your IRA contribution is deductible, you may contribute to your IRA up to the allowable limits. The difference between your total permitted contributions and your IRA deduction, if any, is your nondeductible contribution. Earnings derived from nondeductible contributions are not taxed until distributed. If you make nondeductible IRA contributions, a cost basis is created in your IRA equal to the sum of your nondeductible contributions minus any withdrawals or distributions of nondeductible contributions. Report your nondeductible contributions on IRS Form 8606. If you fail to report your nondeductible contributions or if you overstate your nondeductible contributions, you may be subject to taxes and penalties. Tax Credits for Contributions. You may be eligible for a tax credit for your Traditional IRA contribution. The maximum annual tax credit is $1,000 and, if you are eligible, the credit will reduce your federal income tax you owe dollar for dollar. You may be eligible for the tax credit if you are age 18 or older, not a dependent of another taxpayer, and not a full-time student.

Nondeductible Contributions. Regardless of whether your IRA XXX contribution is deductible, you may contribute to your IRA XXX up to the allowable limits. The difference between your total permitted contributions and your IRA XXX deduction, if any, is your nondeductible contribution. Earnings derived from nondeductible contributions are not taxed until distributed. If you make nondeductible IRA XXX contributions, a cost basis is created in your IRA XXX equal to the sum of your nondeductible contributions minus any withdrawals or distributions of nondeductible contributions. Report your nondeductible contributions on IRS Form 8606. If you fail to report your nondeductible contributions or if you overstate your nondeductible contributions, you may be subject to taxes and penalties. Tax Credits for Contributions. You may be eligible for a tax credit for your Traditional IRA XXX contribution. The maximum annual tax credit is $1,000 and, if you are eligible, the credit will reduce your federal income tax you owe dollar for dollar. You may be eligible for the tax credit if you are age 18 or older, not a dependent of another taxpayer, and not a full-time student.