Individual Retirement Arrangements (IRAs)
Traditional IRA income limits increased.
For 2000, if you are covered by a retirement plan at work, your
deduction for contributions to a traditional IRA will be reduced
(phased out) if your modified adjusted gross income (AGI) is between:
- $52,000 and $62,000 for a married couple filing a joint
return or a qualifying widow(er),
- $32,000 and $42,000 for a single individual or head of
household, or
- $-0- and $10,000 for a married individual filing
a separate return.
For all filers other than married individuals filing separate
returns, the upper and lower limits of the phaseout range increased by
$1,000. The range limits did not change for married individuals filing
a separate return. See Publication 590,
Individual Retirement
Arrangements (IRAs), for more information on IRA deductions.
Returned contributions and recharacterizations.
Beginning in 2000, a new calculation method allows you to take into
account loss on a returned or recharacterized IRA contribution when
determining the amount of net income that also must be withdrawn or
recharacterized. Under the new method, the net income may be a
negative amount. Under the old method, net income could not be a
negative amount.
For more information on returned contributions, see
Contributions Returned Before the Due Date in chapter 1 of
Publication 590,
Individual Retirement Arrangements (IRAs).
For more information on recharacterizations, see
Recharacterizations in chapter 2 of Publication 590.
5-Year Tax Option Repealed
The 5-year tax option for figuring the tax on lump-sum
distributions from a qualified retirement plan has been repealed.
However, a plan participant can continue to choose the 10-year tax
option or capital gain treatment for a lump-sum distribution that
qualifies for the special treatment. See the discussion on lump-sum
distributions under Taxation of Nonperiodic Payments in
Publication 575,
Pension and Annuity Income.
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