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There are two different types of IRAs and both come with their own benefits and drawbacks. The first is the deductible IRA, where you can deduct contributions from your taxable income. The nondeductible IRA does not allow for this deduction which means you will pay taxes on the contributions as you make them. The lack of a deduction has some advantages as well as it allows more flexibility in terms of contribution limits, as compared to a deductible IRA.

A deductible IRA is a type of Individual Retirement Account where you can deduct contributions from your taxable income. Contributions to a deductible IRA are tax-deductible, which means that their growth and earnings won't be taxed until withdrawal. You cannot contribute more than you earn in a given year though. If you have another job, the contribution limit is $5500 per year if you're under 50 and $6500 if you're aged 50 or above.

You pay taxes on the contributions as you make them, but the benefits of a deductible IRA are that it offers some tax relief as well as reduces your taxable income. The contribution limits for this type of IRA are also high in comparison to a nondeductible IRA.

A nondeductible IRA is a type of Individual Retirement Account where you cannot deduct the contributions from your taxable income. This means that all growth and earnings will be taxed as they earn this money. You can still contribute to a nondeductible IRA, but you will pay taxes on your contribution as you make it. This type of IRA works in the same way as a deductible IRA, so you can contribute $5500 per year if you're under 50 and $6500 if you're aged 50 or above.

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