2021 IRA Contributions & change in 401k coverage

[Audlogic]

The situation: My wife had access to a 401k through her previous employer for the entirety of 2021. She switched jobs on 1/2/2022 and her new employer does not have a 401k or any employer sponsored retirement plan. I was a stay-at-home parent for 2021 and also did not have access to any retirement plans. Her income puts us above the standard limit for IRA deductions with 401k coverage. However, the TurboTax Retirement calculator states that if we do not have coverage by a retirement plan we can deduct IRA contributions. The calculator is unclear as far as timeline when it asks if we are "covered by a retirement plan at work." 

I am trying to determine if we can deduct traditional IRA contributions made before April 2022 given she has no 401k coverage now or if this tax situation will only apply next year due to her having 401k access for all of 2021. 

Many Thanks

-J

[DanaB27 · Accepted solution]

Yes, since your wife was covered by a retirement plan all year in 2021 the IRA deduction limits apply for any 2021 traditional IRA contributions (including contributions made in 2022 for 2021).

For your information, if you had a retirement plan at work for one day in during the year then you are deemed to have been covered by a retirement plan all year.