Non-deductible IRAs are subject to the same contribution limits as other IRAs. Any money that contributes to a traditional IRA and that you don't deduct on your tax return is a “non-deductible contribution.” You must still declare these contributions on your return, and to do so, you must use Form 8606. When you turn 72, the IRS requires you to add up the value of all your deductible and non-deductible IRAs and begin receiving distributions from your traditional (but not Roth) IRAs. More importantly, adding money to a non-deductible IRA may be the best place for Gold IRA if you want to include a Roth IRA in the mix when planning for retirement. Keep in mind that non-deductible IRAs are subject to the same maximum contribution limits as Roth IRAs and traditional IRAs. If your tax-filing status or income puts you outside the range of the traditional IRA limits described above, that's when you make non-deductible contributions to the IRA.
The most popular reason to make non-deductible contributions to an IRA is because you've exceeded income limits to deduct traditional IRA contributions or because you can't contribute to a Roth IRA, says Adam Bergman, president of IRA Financial Trust and IRA Financial Group in Miami. After you pay taxes on your income, you can make non-deductible contributions to a traditional IRA. Non-deductible contributions to an IRA don't provide an immediate tax benefit because they're made with after-tax money, such as a Roth IRA. However, you can still contribute to a Roth IRA and make cumulative contributions to a Roth or traditional IRA, regardless of your age.
A non-deductible IRA is a way of making contributions to an individual retirement account, not to a specific type of IRA. Alternatively, you could consider a non-deductible IRA if your income makes you ineligible for a Roth IRA. To execute a clandestine Roth IRA, you must first open a traditional IRA and then make a non-deductible contribution to the IRA. Non-deductible IRA contributions only make sense for retirement planning when your annual income exceeds the limits of a traditional IRA or a Roth IRA.
Even if you can't deduct your contributions for the year or contribute to a Roth, a non-deductible IRA allows you to fully utilize an IRA as part of your retirement strategy.
