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Retirement tax questions
Yes, that's a surprising result, but there are reasons that can happen.
Usually, a deductible IRA will increase your refund by the percentage of the contribution that matches your tax bracket. For example, you are in the 25% bracket, you contribute $7,500, and your refund increases by $1,875 ($7,500 x 25%).
Here are some reasons why it may not work that way sometimes:
- You are a retirement plan participant and your IRA deduction was limited due to your income being above the threshold. You can check Schedule 1, line 20 to see if your IRA deduction was less than the full contribution.
- Your income was less than usual, or your deductions were more and you didn't need the full contribution to reduce your taxable income to zero. Check line 15 of Form 1040. If it is zero, you don't need the entire contribution to get your maximum refund.
- Your contribution was considered an excess contribution and you were charged a penalty for that. Check line 8 of Scheulde 2. If you have a figure there, you were penalized.
- You had limited nonrefundable tax credits, and your IRA deduction reduced the allowed amount. Check line 20 of Form 1040. If you have a number there, you don't need the entire contribution to get your maximum refund.
- You are subject to Alternative Minimum Tax. Check to see if Form 6252 is included in your return.
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‎April 9, 2024
9:03 AM