Question:
Is the trustee fee I received income that I can use to calculate my IRA contribution in the same year?
Response:
Yes, it is earned income that must be reported on your tax return and, as such, can be factored in when determining your IRA contribution.
In 2023, IRA contributions are limited to $6,500 for individuals aged 50 and under and $7,500 for individuals over age 50. Such contributions will not be taxable for the year in which they are deposited, but will be taxed when withdrawn.
Your actual income does not affect how much you may contribute to your IRA. However, if your income is low you may not get the full benefit of the tax deduction. In other words, if you are not paying any income tax in any case, your IRA contribution will not reduce your taxes. And it’s possible that a future withdrawal from the IRA will result in taxes if your income is higher at that time.
