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Minimum deduction for IRA contributions

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in Small Business Tax

Q: I've been encouraging both my children, now ages 24 and 21, to make contributions to an IRA. But is there any minimum deduction for lower-wage earners? C.M., Glen Burnie, Md.

A: Yes. For starters, the maximum IRA contribution a person can make for the 2004 tax year is the lower of 1) $3,000 or 2) 100 percent of earned income from wages or self-employment. For the 2005 tax year, the dollar figure will rise to $4,000. Typically, a financial institution will require a minimum amount—say, at least $100—to set up an IRA account.

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