Traditional IRA Eligibility (Self-Directed IRA and Captive IRA)
Traditional IRA eligibility is very simple. To contribute to a Traditional IRA, you must meet two requirements:
- You must have earned income for the year in which you're making a contribution
- You must be younger than 70 1/2 years old
Earned income is generally the type of income that is reported on a W-2 or 1099 form. It's the type of income that results from your direct labor.
Income such as rents, royalties, dividends, deferred compensation, annuity income and such are not active income. If that is the only type of income you have, you'll not be eligible to contribute to a Traditional IRA.
Remember: The issue of "eligibility" for a Traditional IRA only concerns whether you are eligible to make new contributions. But even if you are not eligible to contribute in a given year, you continue to own any Traditional IRA's that you owned in the past. Eligibility does not affect ownership, only your right to make new contributions.