Traditional and Roth IRA tax FAQ

Traditional and Roth IRA contributions must be made by the tax-filing deadline: April 15, 2024 for 2023 contributions.

Contributions for the prior year can be made via Automated Clearing House (ACH) until market close, 4 p.m. ET, on the tax-filing deadline.

• For 2023, the maximum contribution limit is $6,500 or 100% of taxable compensation, whichever is less.
• For 2024, the maximum contribution limit is $7,000 or 100% of taxable compensation, whichever is less.
   

IRA owners who are age 50 or older by the end of the taxable year can make additional catch-up contributions of up to $1,000 annually.

Roth IRA contributions are not tax-deductible.

Traditional IRAs contributions may be deductible, based on:

• The IRA owner’s filing status
• Their MAGI for the tax year
• Whether the IRA owner or spouse is covered by an employer-sponsored retirement plan
   

For current eligibility requirements, review “Deductible contributions” in the IRA comparison table.

You can claim a nonrefundable tax credit for contributions if you are eligible.

For current eligibility requirements, review “Tax credit for contributions” in the IRA comparison table.

IRA contributions are reported on Form 5498, which is available by May 31.

Form 5498 is sent only for accounts that had contributions for the applicable tax year.

Note: Form 5498 is not required to be filed with your tax return.

Log in to your account and go to Statements & Tax Forms. Click on the applicable tax year to access the desired tax forms.

Watch How to view and download statements and tax forms for a tutorial.

IRA rollovers can be direct or indirect.

For indirect rollovers, the IRS requires the following:

• IRA owners must roll over assets within 60 calendar days of receipt 
• If an indirect rollover is from IRA to IRA, only one rollover is allowed per consecutive-12-month period, regardless of the number of IRAs owned. This limitation includes IRAs the investor owns with Capital Group or other companies.
   

Rollovers that do not meet IRS guidelines can be subject to penalties. Consult a tax advisor for additional guidance. 

• A rollover distribution is reported to the IRS on Form 1099-R. The tax forms are issued in January for distributions taken during the prior year.
• A rollover contribution is reported to the IRS on Form 5498. The tax forms are issued in May for rollover contributions made during the prior year.
   

Note: A transfer of assets is not tax reportable. If a distribution or contribution is treated as a transfer, a tax form isn't generated.

Since you have until the tax-filing deadline in April to make contributions to IRAs and Education Savings Accounts (ESAs), Capital Group must wait until after the tax-filing deadline to send these forms. Form 5498-ESA is sent in April, and Form 5498 (for IRAs) is sent in May. As a reminder, you are not required to attach a copy of Form 5498 or Form 5498-ESA to your income tax return.

Distributions to IRA owners age 59½ or over are considered normal distributions and therefore not subject to IRS early distribution penalties.

All distributions are reported on form 1099-R, and it’s the owner’s responsibility to determine the taxable amount.

Note: Roth IRA distributions from earnings are tax-free if your initial contribution to the account was made at least five years ago and you meet one of the following conditions:

• You’re age 59½
• You’re disabled
• You’re purchasing a home for the first time (up to $10,000)

For traditional IRAs, nondeductible contributions are not subject to taxes when withdrawn; however, deductible contributions are subject to taxes.

For Roth IRAs, distributions are tax-free if the first contribution was made at least 5 years before and the investor is at least 59½, is purchasing a first home or is disabled or deceased.

Distributions to IRA owners under the age of 59½ are considered early distributions. Early distributions are subject to IRA taxes, if applicable, and penalties unless an exception applies.

The IRS allows the following exceptions from early distribution penalties:

• Advisor fees/asset allocation fees
• Beneficiary distributions
• Disability distributions
• Certain medical expenses
• Certain unemployed individuals to pay health insurance premiums
• First-time home purchase expenses
• IRS levy
• Qualified higher education expenses
• Qualified reservist distributions
• Substantially equal periodic payments
• Distributions made while terminally ill*
• Birth or adoption expenses* (up to $5,000 and taken within one year of the birth or adoption)
• Distributions made in connection with a federally declared disaster (up to $22,000)*
• Distributions for unforeseeable or immediate financial needs related to necessary personal or family emergency expenses (up to the lesser of $1,000 or the excess of your account balance over $1,000)*
• Distributions due to domestic abuse (up to the lesser of $10,000 or 50% of the account balance)*
   

Consult a tax advisor for additional details and qualification requirements.

*Distribution amounts can be repaid to an IRA, or a retirement plan that accepts rollovers, within 3 years of the day the distribution was received.

Capital Bank and Trust Company (CB&T) does not require documentation on distributions for medical expenses, health insurance premiums, first-time home purchases, higher education expenses, federally declared disasters, personal or family emergency expenses and domestic abuse. Therefore, these distributions (if taken before age 59½) are reported to the IRS as “early distribution, no known exception.” If applicable, you may file IRS Form 5329 to report the exception code and avoid the 10% early distribution penalty.

IRA distributions are reported on Form 1099-R, which is available in mid to late January.

Form 1099-R is provided only for accounts that had distributions for the applicable year.

IRA distributions, even if all or part of the distribution is rolled back in, are required to be reported on Form 1099-R.

Form 5498 reflects contributions, including rollovers, made to IRA accounts. Generally, the amount rolled over will not be subject to taxes or an early distribution penalty. 

Log in  to your account and go to Statements & Tax Forms. Click on the applicable tax year to access the desired tax forms.

Watch How to view and download statements and tax forms for a tutorial.