2000 Changes

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loss on a returned or recharacterized IRA contribution when determining the amount of net income that also must be withdrawn or recharacterized.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5-Year Tax Option Repealed

The 5-year tax option for figuring the tax on lump-sum distributions from a qualified retirement plan has been repealed.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.

Previous| First | Next

Publication Index | IRS-Forms Main | Home