Congress also authorized a new type of IRA, called a Roth IRA, that offers different types of tax advantages. You can open and contribute to the account even if you are on Social Security, as long as you have other earned income.

Does Illinois tax IRA contributions?

Illinois does not tax distributions received from: qualified employee benefit plans, including 401(K) plans; an Individual Retirement Account, (IRA) or a self-employed retirement plan; the federally taxed portion of Social Security benefits.

Can a parent contribute to a child’s IRA?

Parents can’t put money directly into their child’s IRA like they can with a child’s savings account. Money that parents give to their child is potentially subject to gift taxes.

What happens if I contribute to someone else’s IRA?

If the recipient contributes more than permitted, the IRS imposes a 6 percent excess contributions penalty on that person each year until the excess is corrected. If you make a gift to another person to contribute to an IRA, that money counts toward your maximum annual gift to that person before you have to pay the gift tax.

Can a person with no income contribute to an IRA?

When you are married and file a joint return with a spouse, you can use your earned income to qualify your spouse to contribute to an IRA if your spouse does not have any earned income. If your spouse does not have a paying job, she generally cannot contribute to an IRA.

Can a spouse be the beneficiary of an IRA in Illinois?

An exception to the rule about changing your IRA beneficiary exists in community property states – but Illinois isn’t one of these states. In community property jurisdictions, your wife owns half the marital portion of your IRA by operation of law.

Do you have to be an employed spouse to contribute to an IRA?

If you’re the employed spouse and the family wants to make an IRA contribution for your spouse, you must: Have earned income or other eligible compensation that’s at least as much as your total contribution to your IRAs File a joint income-tax return with your spouse