Who is eligible

Traditional IRA

Roth IRA

Any person with earned income who is under 70-1/2.

Single filer with earned income. (Eligibility to participate phased out with modified AGI from $95,000–$110,000.)

A nonworking spouse under age 70-1/2 who files a 
joint return that includes earned income.

Joint filers with earned income. (Eligibility to participate phased out with modified AGI from $150,000–$160,000.)

Married, filing separately: eligibility to participate phased out at $10,000.

Maximum annual contribution

Traditional IRA

Roth IRA

$3,000 total contribution to all Traditional IRAs. If age 50 or older, can add up to $500 to total contribution.

Same as Traditional IRA, subject to phase-out range depending on modified AGI.

Phase-out range for deductible portion of contribution

Traditional IRA

Roth IRA

Single filer retirement plan participant: modified AGI for 2002 from $34,000–$44,000 and for 2003 from $40,000–$50,000.

None of the contribution is tax-deductible.

Single filer, no retirement plan participation: 
contribution is 100% deductible.

Joint filer, retirement plan participant: modified AGI 
for 2002 from $54,000–$64,000 and for 2003
from $60,000–$70,000.

Married, filing separately, retirement plan participant: 
modified AGI from $0–$10,000.

Joint filer, no retirement plan participation but spouse 
is covered by plan: modified AGI from $150,000–$160,000.

Joint filer, neither spouse is a retirement plan participant: 
contribution is 100% deductible.

Tax credit for contributions

Traditional IRA

Roth IRA

Through 2006, eligible taxpayers can claim a nonrefundable tax credit for contributions.

Same as Traditional IRA.

The maximum credit allowed is 50% of the annual contribution amount up to $2,000.

Joint filers with an AGI of $50,000 or less, heads of 
household with an AGI of $37,500 or less and single 
filers with an AGI of $25,000 or less qualify for the credit.

Federal income tax treatment on contributions

Traditional IRA

Roth IRA

Taxes are deferred until distributions are made; taxable distributions are taxed as ordinary income.

Contributions are made with after-tax money; therefore, withdrawals from contribution amount (basis amount) are always tax-free.

If nondeductible contributions have been made, 
each withdrawal is taxed proportionately.

Federal income tax treatment on earnings

Traditional IRA

Roth IRA

Earnings grow tax-deferred until distributions begin. Distributions are treated as ordinary income.

Qualified distributions are tax-free.

Nonqualified distribution — Earnings are taxed as ordinary income.

Conversions — Earnings are tax-free after the conversion amount satisfies the five-year investment period.

Conversions

Traditional IRA

Roth IRA

Conversion to a Roth IRA — Allowed, if modified AGI is $100,000 or less (single or joint) and, if married, taxpayers must file jointly. The converted amount is taxed as income, but no penalty applies.

Conversion to an education savings account — Not allowed.

Conversion to an education savings account — 
Not allowed.

Rollovers

Traditional IRA

Roth IRA

To employer-sponsored plans — Pretax contributions can be rolled over to a 401(k) or to another qualified plan, as well as to 403(b) and 457(b) plans. However, the receiving plan must accept IRA rollovers.

From / To another Roth IRA — allowed.

From employer-sponsored plans — Eligible pretax 
and after-tax distributions from qualified plans, as well 
as from 403(b) and 457(b) plans, can be rolled over.

Distributions

Traditional IRA

Roth IRA

Distributions from contributions and earnings can be taken after age 59-1/2 without penalty.

Distributions from contributions can be made any time without taxes or penalty.

Mandatory withdrawals must begin at age 70-/12.

Distributions from earnings are tax-free if the initial contribution to the account was made at least five years ago and IRA owners meet one of the following exceptions:

Premature distributions are subject to a 10% penalty tax unless IRA owners qualify for one of the following exceptions:

they’re age 59-1/2

they’re age 59-1/2

they’re disabled

they’re disabled

they’re purchasing a first home they die

they’re taking substantially equal periodic payments

the distribution is for certain medical bills

Distributions from earnings are not subject to the 10% penalty as long as IRA owners qualify for an exception:

the distribution is used for health insurance premiums 
during unemployment lasting at least 12 weeks

the distribution is for qualified education expenses

Same as exceptions for Traditional IRAs.

the distribution is used to purchase a first home (up to 
$10,000 lifetime maximum)

they die

Distributions from a conversion amount must satisfy a five-year investment period to avoid the 10% penalty. This pertains only to the tax-deferred portion of the conversion amount, which was treated as income for tax purposes at the time of the conversion.

Required minimum distributions (RMDs)

Traditional IRA

Roth IRA

Must begin no later than April 1 of the year following the year the taxpayer turns 70-1/2. May be taken in a lump sum or annual payments. (See important information about new

No RMD applies before IRA owner’s death. After death, Traditional IRA distribution rules apply for beneficiaries.

All IRA balances are aggregated, but the withdrawals 
may be taken from only one. However, the contributions/
earnings are taxed pro rata.