I had 1 W2 for (Box 1/$61876). Wife had 2 (Box 1/$38453, Box 12a (DD) $18611 Box 12b (E) $2754, & (Box 1/$21747, Box 12a (D) $220. Total $122076. Can I still buy 2 IRAs?

[davidlwaldrop]

We did have a total of $481, and a 1099 Misc to me of $3136, for a total of, $125,436, but we had $45523 in deductions. I reported 2 IRAs on for her, and 1 for me of $6500 each.  It took mine, and gave the deduction. On my wife's, it tells me that her 'Modified Adjusted Gross Income' is is $126214, and will not give the deduction. We did not make that much TOGETHER, much less her alone. I do not understand. First question, what is the rule on this? Second, if I am not going to get a deduction for her IRA, should I convert it a Roth IRA?

[DanielV01 · Accepted solution]

You can claim the full deduction on your contribution, but she cannot.  Here is an FAQ that describes the IRS' rule for deducting IRA contributions:  https://ttlc.intuit.com/replies/3301534  You will notice that because she does participate in an employer-sponsored retirement plan (401K and 403b, which are the codes D and E that you mention on her Forms W-2), and your combined taxable income is above 119,000 (add the amounts in box 1), she is not allowed to take a deductible IRA contribution.  You can, however, because, since you do not participate in a company retirement plan, you are allowed to take a deduction up to 186,000 of income.  Because of all of the taxes that are withheld from your paycheck, you never received the full amount that was reported to you, but that is what you earned for tax calculation purposes.

You won't get a deduction for her IRA, but you recharacterize it to a Roth IRA.  Here's an FAQ which discusses this:  https://ttlc.intuit.com/replies/3302139

{edited 02/25/18: 18:39 PST}

[DanielV01]

@davidlwaldrop I actually attached the wrong FAQ, and have edited my answer so you can see the deductible limits on Traditional IRA contributions