Who is eligible to set up an “Individual Retirement Account” (IRA)?
The Tax Reform Act of 1981 allows anyone with earned income to set up an IRA. Regardless of where you work — in private industry, for the government, or for a tax-exempt organization — so long as you have earned income, you are eligible to establish an IRA to invest for your own retirement. The Act allows you to set aside $2,000 of earned income for retirement. In addition the Tax Reform Act of 1981 allows you to expand your IRA coverage to include a spouse not working outside of the home. The Reform Act permits a contribution of up to $2,250 in a spousal IRA. When you calculate your income taxes, you can take the entire contributed amount as a first deduction — even before you include any other itemized or standard deductions. If you set up an IRA, you do not have to pay taxes on the amount deducted or any dividends, interest, or capital gains generated by the investment of these funds until you begin withdrawing from the account. Many persons do not withdraw funds until they retir
