For individuals not covered by an employer-sponsored plan, what is true about IRA contributions?

When individuals are not covered by an employer-sponsored retirement plan, they are eligible to deduct their contributions to an Individual Retirement Account (IRA) on their tax return. This means that the amount contributed can be deducted from their taxable income, which can effectively reduce their overall tax liability for the year.

In the case of traditional IRAs, the deduction works as an incentive to encourage saving for retirement and allows individuals to grow their investments tax-deferred. The important factor here is the tax situation of the individual; since they do not have access to an employer-sponsored plan, they can fully benefit from the deductible contributions.

For traditional IRAs, there are indeed annual contribution limits, which are typically adjusted for inflation and are subject to change. However, these limits apply to how much can be contributed in a given year, rather than whether the contributions are deductible. The age limit for contributions has also changed with new regulations, allowing individuals to continue making contributions beyond age 70½ as long as they have earned income.

Thus, understanding the rules surrounding IRAs and the specific conditions related to employer-sponsored plans is crucial for maximizing retirement savings and ensuring eligible deductions on tax returns.