You can work with TurboTax to determine the maximum IRA deduction, deductible or non-deductible.
You will enter information into your return either with an amount you think you wish to contribute, or the maximum allowed contribution for your age. Then, go through the rest of the questions in that section of your return and there will be messages on the screen telling you what amount will be deductible and/or allowed (depending on the type of IRA contribution that you chose). Then you can take action suggested on the screen to change your contribution amount if required.
Use the following steps to get started:
The maximum IRA contributions for 2020 is $6,000, or $7,000 if you’re age 50 or older by the end of the year; or your taxable compensation for the year which ever is less.
(Taxable compensation is generally wages that you worked for - W-2 or net self-employed income minus the deductible part of the SE tax, but can include commissions, certain alimony and separate maintenance, and nontaxable combat pay ).
See IRS Pub 590A "What is compensation" for details:
https://www.irs.gov/publications/p590a#en_US_2018_publink1000230355
Thank you macuser22, but your response only repeats what I read on turbotax before I posed my question. It does not answer my question, though I know you meant well.
I previously read HOW to calculate the specific maximum dollar amount. But I would like turbotax to tell me that $ amount, without me being required to know what is meant by "net self-employed income" (net of what?) and what is "the deductible part of the SE tax". It's ambiguous.
Turbotax does calculate, and present to the turbotax user, the specific maximum $ amount one can contribute to a 401k or SEP IRA. Does turbotax do the same for contributions to a traditional IRA? If so: where? If not, why not?
You can work with TurboTax to determine the maximum IRA deduction, deductible or non-deductible.
You will enter information into your return either with an amount you think you wish to contribute, or the maximum allowed contribution for your age. Then, go through the rest of the questions in that section of your return and there will be messages on the screen telling you what amount will be deductible and/or allowed (depending on the type of IRA contribution that you chose). Then you can take action suggested on the screen to change your contribution amount if required.
Use the following steps to get started:
Thanks AnnetteB6. As you explained, it was not evident until several screens later (only after entering a contribution amount) that turbotax does tell the user the maximum contribution dollat amount that is deductible. You were astute in realizing I was asking about maximum deductible amount.
Amoung the questions that turbotax asks prior to presenting this amount is: "Are you covered by a retirement plan at work?" If my only income is from self employment, and my only retirement plan is an old SEP IRA, am I "covered by a retirement plan at work"?
If you have a SEP that you or your business contributed to in 2020 then yes. If no 2020 contribution then no.
@rifi wrote:
Thanks AnnetteB6. As you explained, it was not evident until several screens later (only after entering a contribution amount) that turbotax does tell the user the maximum contribution dollat amount that is deductible. You were astute in realizing I was asking about maximum deductible amount.
Amoung the questions that turbotax asks prior to presenting this amount is: "Are you covered by a retirement plan at work?" If my only income is from self employment, and my only retirement plan is an old SEP IRA, am I "covered by a retirement plan at work"?
Actually there is a IRA calculator in TurboTax under "Other Tax Situations", Retirement Savings, IRA calculator tool.
I forgot about that because it was rather lame in prior years, but seems to be better now - I can't vouch for it's accuracy though and it sill thinks that 70 1/2 is the cutoff age for contributions - there is no cutoff age now.
In my example I used an income of $120,000 to be in the phase out range and it seems to do that.
Thanks macuser22. That's what I wanted to know (about "covered at work").
I'm suprised that turbotax doesn't provide guidance on the IRS definiton of "covered at work" right there - where the question is asked. Is it my imagination, or did turbotax previously provide guidance like on things like this up front (without having to jump thru hoops to get the answer)?
Seems like the software is less helpful this year - did turbotax do a "revamp" and let things fall thru the cracks? Is not Intuit a highly lucrative multi billion dollar company?