IRA contribution not being taken off above the line. Am I missing something?

[wendy39]

The amount reduced is a small portion of the amount I contributed

[DanaB27]

Please be aware, the deduction of a traditional IRA contribution may be limited if you or your spouse is covered by a retirement plan at work and your income exceeds certain levels. Please see IRA deduction limits for details.

[wendy39]

Thanks for your reply. We are not covered by retirement plans at work and our income is below the threshold. Is there any other reason we are not getting the above the line deduction? 

[DanaB27]

Please check that you did not select to make it nondeductible during the interview:

1. Login to your TurboTax Account 
2. Click on "Search" on the top right and type “IRA contributions”
3. Click on “Jump to IRA contributions"
4. Select “traditional IRA”
5. Answer “No” to “Is This a Repayment of a Retirement Distribution?”
6. Enter the amount you contributed
7. Answer “No” to the recharacterized question on the “Did You Change Your Mind?” screen
8. Answer the next questions until you get to the “Choose Not to Deduct IRA Contributions” screen check if you selected “Yes, make part of my IRA contribution nondeductible” and enter the amount.

Also, check if box 13 retirement plan on your W-2 is not checked.

[wendy39]

Thanks again. I had checked "no, we'll keep the deduction (recommended)". And I don't have a w2 as I am currently not employed. Can you think of any other ideas? I'm perplexed. Our income is way lower than the threshold as well. From everything I can tell, the contribution is supposed to all be taken off above-the-line. 

[DanaB27]

Yes, the traditional IRA deduction will show on line 19 of Schedule 1.

Did you get a excess contribution warning?

Maybe try to delete an renter the traditional IRA contribution.

[wendy39]

Thanks for your continued help! I only contributed $1000 to a traditional IRA so it is under the limit.  I've tried deleting and reentering, but it just reduces my tax burden by $120 each time. I'm starting to think there may be a software calculation issue? 

[DanaB27]

Did you check line 19 on Schedule 1 if it says $1,000? 

The traditional IRA contribution will reduce your adjusted gross income (AGI) by $1,000 (above the line deduction) and therefore also lower your taxable income. It won't be lowering your tax dollar for dollar like a Credit. You seem to be in the 12% tax bracket and therefore, a $1,000 reduced taxable income will result in $120 reduced tax. This is correct.

[wendy39]

Aha! Thank you for explaining that.