What are the 2012 limits for a traditional IRA contribution?

By Jason Watson (Google+)

For 2012, the most that can be contributed to a traditional IRA is generally $5,000 ($6,000 if you are age 50 or older) or the taxable compensation for the year, whichever is smaller. If you are married, and you do not have any compensation for the year, you can still contribute to your IRA based on your spouse’s compensation, but your deductibility of the contribution might be limited. Your deduction might also be limited based on employer sponsored plans.

Compensation includes wages, salaries, commissions, self-employment income, alimony, spousal maintenance and non-taxable combat pay.

Compensation generally does not include earnings and profits from business property, interest and dividend income, pension or annuity income, deferred compensation, income from certain partnerships and any amount you exclude from income.

If you are a foreign income earner and you exclude your foreign income under the foreign earned income exclusion (IRS Section 911), that amount is still used to determine contribution eligibility.