If lower, your taxable compensation for the year. You can invest in a traditional IRA no matter how much money you make. While there is no general limit for contributing to a traditional IRA, there are income limits for tax-deductible contributions. The ability to make non-deductible contributions regardless of income level makes traditional IRAs a valuable retirement savings account, including an IRA Gold account, that can be converted into a clandestine Roth IRA. However, you must use Form 8606 to declare the amounts you have converted from a traditional IRA, SEP, or simple IRA to a Roth IRA.
If your spouse is covered by a plan at work, there's also a limit to the amount of tax-deductible contributions you can make to your traditional IRA each year. To recharacterize a regular contribution to an IRA, you ask the administrator of the financial institution holding your IRA to transfer the amount of the contribution plus earnings to a different type of IRA (either a Roth or traditional one) through a transfer from trustee to trustee or to a different type of IRA with the same trustee. However, if you or your spouse are covered by an employment retirement plan, there are income limits for making tax-deductible contributions to traditional IRAs. A requalification allows you to treat a regular contribution made to a Roth IRA or a traditional IRA as if it had been made to another type of IRA.
Traditional IRAs don't have this rule, as do other types of IRAs, such as SEP IRAs and SIMPLE IRAs, which are often used by self-employed individuals and small business owners. While a Roth IRA has a strict income limit and people with incomes above it can't contribute at all, that rule doesn't apply to a traditional IRA. Yes, a person under 18 can contribute to a Roth IRA or a traditional IRA as long as they meet earned income requirements and do not exceed income limits. You may still want to make a non-deductible contribution, either because you prefer to allow your investments to grow tax-free and defer income taxes or because you want to make a clandestine contribution to the Roth IRA by contributing to your traditional IRA and then converting it into a Roth account.
While there are ways to introduce money behind closed doors into a Roth IRA, such as contributing to a traditional IRA and converting to Roth, you can't invest money directly in a Roth IRA if your income exceeds the annual limit. Traditional IRA contributions aren't limited by the amount you earn annually, which means that anyone with earned income is entitled to participate, but your contribution may not be fully deductible.
