TurboTax Deluxe 2020 tells me that combined MAGI of 144K is too much to allow the IRA contribution. Is TurboTax wrong?
The following is a portion of a table found at:
If Your Filing Status Is... | And Your Modified AGI Is... | Then You Can Take... |
married filing jointly with a spouse who is covered by a plan at work | $196,000 or less | a full deduction up to the amount of your contribution limit. |
I am covered by a plan at work. She is not. Our combined MAGI is less than 196,000. She is over 50, so shouldn't she be able to contribute up to $7000.
Yet, here is what TurboTax says:
Marie’s MAGI is $144,175 (it’s not, that’s our combined MAGI), which puts it over the limit for IRA deductions. To deduct a contribution, your can’t have a MAGI over $124,000 while being covered by retirement plan at work (she’s not, I am)
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What the IRS says under "What's new for 2020?":
Modified AGI limit for traditional IRA contributions. For 2020, if you are covered by a retirement plan at work, your deduction for contributions to a traditional IRA is reduced (phased out) if your modified AGI is:
More than $104,000 but less than $124,000 for a married couple filing a joint return or a qualifying widow(er),
More than $65,000 but less than $75,000 for a single individual or head of household, or
Less than $10,000 for a married individual filing a separate return.
However, right after that it says:
Modified AGI limit for certain married individuals.
If you are married and your spouse is covered by a retirement plan at work and you aren’t, and you live with your spouse or file a joint return, your deduction is phased out if your modified AGI is more than $196,000 (up from $193,000 for 2019) but less than $206,000 (up from $203,000 for 2019). If your modified AGI is $206,000 or more, you can’t take a deduction for contributions to a traditional IRA.
Seems like the first applies to me and the second applies to her.
Yes, you are correct about the limits and if your wife wasn't covered by a retirement plan at work she should be able to deduct the traditional IRA contribution. Please keep in mind if she had a retirement plan at work for one day, then she is considered to been covered by a retirement plan for the year and she won't be able to deduct the traditional IRA contributions if your MAGI is above $124,000.
Please check her W-2 entry if the retirement plan in box 13 is checked or is box 12 indicates any retirement contributions.
TurboTax does the calculation correctly.
"Marie’s MAGI is $144,175 (it’s not, that’s our combined MAGI)," There is only one MAGI on a joint tax return and is the MAGI of both of you.
In addition to verifying that Marie's W-2 does not have box 13 Retirement plan marked, make sure that you have identified your W-2 as belonging to you, not to Marie. Edit your W-2 in TurboTax to check.
If Marie's W-2 has box 13 Retirement plan marked, perhaps the company provides a pension plan that would make her covered.
That was it! I had box 13 checked incorrectly.
I do not understand why TT is limiting our IRA contribution for my spouse (I'm retired) She worked 3 months as an independent contractor in 2020. TT say our MAGI is $154.091 and we can't have a MAGI over $124k while being covered by a retirement plan at work. She is not covered.... she has no W2, she is paid by 1099. (Most other answers say to check box 13 on a W2)
She is over 50 which means she should be able to contribute $7k, which we did (Her earned income for the work she did was $12K.)
Not only is TT saying it isn't deductible it is saying we have to pay an "over contribution" penalty.
@ClintinWC wrote:
I do not understand why TT is limiting our IRA contribution for my spouse (I'm retired) She worked 3 months as an independent contractor in 2020. TT say our MAGI is $154.091 and we can't have a MAGI over $124k while being covered by a retirement plan at work. She is not covered.... she has no W2, she is paid by 1099. (Most other answers say to check box 13 on a W2)
She is over 50 which means she should be able to contribute $7k, which we did (Her earned income for the work she did was $12K.)
Not only is TT saying it isn't deductible it is saying we have to pay an "over contribution" penalty.
Does she have a self-employed retirement plan? SEP, SIMPLE, SE 401(k) reported on schedule C?
macuser_22 meant to ask if she has a self-employed retirement deduction reported on Schedule 1 line 15, not on Schedule C (based on the net profit reported on Schedule C).
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