what are the different types of iras and their rules 
the following is a breakdown of the various types of iras and the rules regarding each one in most cases contributions to traditional iras are tax deductible so if you put 4 000 into an ira your taxable income for the year decreases by that amount your money grows tax deferred in a traditional ira when you withdraw the money after retiring it is taxed at your ordinary income tax rate for that year for 2023 the maximum annual individual contribution to traditional iras is 6 500 if you are age 50 or older you can also contribute a catch up contribution of 1 000 for a total of 7 500 7for 2024 the maximum annual individual contribution is 7 000 the catch up contribution continues to be 1 000 for those 50 and over 8if you don t have a retirement plan at work your traditional ira contributions are fully deductible but if you or your spouse if you are married have a retirement plan at work such as a 401 k or 403 b your modified adjusted gross income magi determines whether and how much of your traditional ira contributions can be deducted if you have a retirement plan at workfor 2023 if you are single or file as head of household and have a retirement plan at work your traditional ira contributions are fully deductible if your magi is below 73 000 for 2024 your magi must be below 77 000 8if you are married and filing jointly for 2023 your traditional ira contributions are fully deductible if your magi is below 116 000 for 2024 your magi must be below 123 000 from there the deductibility of your contributions starts to phase out as your magi increases 8it is possible to have both a roth ira and a traditional ira or several iras at different institutions however the total annual contribution to all of your iras cannot exceed 6 500 or 7 500 for those age 50 or older for 2023 and 7 000 or 8 000 for those age 50 or older for 2024 9for 2023 the income range that phases out the deductibility of traditional ira contributions for married couples is 116 000 to 136 000 for 2024 it s 123 000 to 143 000 8for single taxpayers or heads of households the phase out range for 2023 is 73 000 to 83 000 for 2024 it s 77 000 to 87 000 8if you don t have a plan at work but your spouse doesif you contribute to an ira and aren t covered by a workplace plan but are married to someone who is the income phase out range in 2023 is 218 000 to 228 000 for 2024 it s 230 000 to 240 000 8use this chart to see how much of your contribution may be deductible roth ira contributions are not tax deductible in the year in which you make them but the distributions are tax free that means you contribute to a roth ira using after tax dollars and pay no taxes even on your investment gains also roth iras do not have required minimum distributions rmds if you don t need the money you don t have to take it out of your account where it continues growing tax free you can contribute to a roth ira as long as you have eligible earned income no matter how old you are 10roth ira contribution limits for the 2023 and 2024 tax years are the same as they are for traditional iras however there is a catch there are income limitations on contributions to a roth ira the phase out range for single filers is 138 000 to 153 000 for 2023 and 146 000 to 161 000 for 2024 for married couples filing joint returns the phase out range is 218 000 to 228 000 in 2023 and 230 000 to 240 000 in 2024 118as of jan 1 2023 the age at which required minimum distributions rmds must begin is 73 that applies to withdrawals from traditional ira and 401 k accounts as well as simple and sep iras roth account owners aren t subject to rmds the penalty for failing to take an rmd is from 10 to 25 of the amount not withdrawn 12self employed individuals such as independent contractors freelancers and small business owners can set up sep iras a sep ira adheres to the same tax rules for withdrawals as a traditional ira for 2023 sep ira contributions are limited to 25 of compensation or 66 000 whichever is less 13 for 2024 the maximum allowed contribution is 69 000 1415business owners who set up sep iras for their employees are able to deduct the contributions that they make on behalf of employees however the employees cannot contribute to their own accounts and the irs taxes their withdrawals as income 13the simple ira is also intended for small businesses and self employed individuals this type of ira follows the same tax rules for withdrawals as a traditional ira 16unlike sep iras simple iras allow employees to make contributions to their accounts and the employer is required to make contributions as well all the contributions are tax deductible potentially pushing the business or employee into a lower tax bracket the simple ira employee contribution limit is 15 500 in 2023 and the catch up limit for workers age 50 and older is 3 500 17 for 2024 the contribution limit is 16 000 and the maximum catch up amount remains 3 500 188in 2008 the irs issued revenue ruling 2008 5 which states that ira transactions can trigger the wash sale rule should shares be sold in a non retirement account followed by the purchase of substantially identical shares in an ira within a 30 day period the investor cannot claim tax losses for the sale the investment s basis in the individual s ira won t increase either 19required minimum distributions rmds required minimum distributions rmds are withdrawals that owners of traditional ira and 401 k accounts must take every year after they reach a certain age the age has been revised upwards a couple of times as of jan 1 2023 an account holder must begin taking money out in the year he or she turns age 73 that age rises to 75 in 2033 20the amount a person must withdraw is based on the account size and the person s life expectancy the irs has a worksheet to calculate the amount 21failure to take the minimum triggers a severe tax penalty as of 2023 that penalty is 25 of the balance of the account that s half the previous penalty but still expensive enough to keep us on our toes 12this penalty can be reduced to 10 in many cases however if the taxpayer takes corrective action early 12comparing ira optionsuse the chart below to get a better sense of how the different iras work note to view the full chart use the slider at the bottom to see the column at the far right 