Can I deduct IRA contributions?

[r101681a9185]

I was making IRA contributions in January to September 2016.  Stopped making contributions in October and started contributing to a 401k in October.  Can I deduct the IRA contributions when I didn't have a 401k?

[IreneS]

Yes - for a Traditional IRA (not Roth).  However, if you were covered by an employer retirement plan, your deduction for the contributions might be limited.

If you are--

Single, and your modified adjusted gross income is:

• $61,000 or less - You get the full deduction
• more than $618,000 but less than 71,000 - partial deduction
• $71,000 or more - no deduction

Married filing joint return, and your modified adjusted gross income is:

• $98,000 or less - You get the full deduction
• more than $98,000 but less than $118,000 - partial deduction
• $118,000 or more - no deduction

Married filing separately*, and your modified adjusted gross income is:

• less than $10,000 - partial deduction
• $10,000 or more - no deduction

*Married individuals filing separately who live apart at all times during the year are treated as single.

To enter contributions to a Traditional IRA in TurboTax, please follow these steps:

1. Click on Federal Taxes > Deductions & Credits  [In TT Self-Employed:  Personal > Deductions & Credits > I'll choose what I work on].
2. Scroll down to the Retirement and Investments section and click on the Start/Revisit box next to Traditional and Roth IRA Contributions.  [See Screenshot #1, below.]
3. On the Traditional IRA and Roth IRA screen, mark the box for Traditional IRA and click Continue.  [Screenshot #2]
4. On the screen, Did you Contribute to a Traditional IRA?  click the Yes box.  [Screenshot #3]
5. Click the appropriate box on Is This a Repayment of a Retirement Distribution?  [Screenshot #4]
6. On the Tell Us How Much You Contributed screen, enter the amount of your contribution and click Continue.  [Screenshot #5]
7. Continue through the screens, entering the requested information.

[r101681a9185]

Why can't I deduct my IRA contributions for the nine months that I didn't have a 401K?

[IreneS]

You can deduct them.  It's just that the deduction may be limited if your employer had a retirement plan available for you -- whether you participated in it or not.

[r101681a9185]

They did not have a retirement plan when I was making the IRA contributions.

[IreneS]

Then make sure box 13--Retirement Plan is not checked on your W-2 entry screen.

[r101681a9185]

Thank you!

[r101681a9185]

I removed the check from the Retirement Plan, but I still cannot deduct my IRA.  My 401k contributions show on my W-2.  There must be some way that I can deduct the IRA contributions I made in Jan. to Sept. 2016 prior to my employer starting a 401k in October 2016.

[macuser_22]

You were covered by a retirement plan at work for the entire year if covered for one day during the 2016 tax year.  If box 13 is checked on your W-2 you must check in.  The IRS gets a copy.    The 401(k) reporting in box 12 on yiur W-2 also tells TurboTax (and the IRS) that you were covered and cannot deduct the IRA.

[signor0816]

I have 401k at work but not a pension. The 401k is considered a "retirement plan" for tax purposes correct?  So the limitations apply.  

[Opus 17]

---

@signor0816 wrote:

I have 401k at work but not a pension. The 401k is considered a "retirement plan" for tax purposes correct?  So the limitations apply.  

---

Correct, if you are covered by a qualified retirement plan at work (which includes a 401(k),) then your ability to also contribute to an outside IRA is determined by your filing situation and income.

You can contribute up to $6000 (or $7000) to a traditional IRA, but you may not be able to deduct those contributions.  See this page to determine your deductible amount.

https://www.irs.gov/retirement-plans/ira-deduction-limits

Your ability to contribute to a Roth IRA is affected by your income but not by your participation in a workplace retirement plan, see here,

https://www.irs.gov/retirement-plans/amount-of-roth-ira-contributions-that-you-can-make-for-2021