2024 IRA Deduction Limit Glitch?

[tez15]

It appears that turbotax is not calculating the IRA deduction correctly.  For a married couple, filing jointly, 1 spouse eligible for a retirement plan, with an AGI below $123,000, the full deduction ($7000 or $8000 depending on age) should be eligible, but the program is phasing out the deduction for the retirement eligible spouse as if the AGI is above $123,000.

[AnnetteB6]

To take a closer look at the situation and try to explain it or determine if there is something that needs the attention of the development team, it would be very helpful to have a diagnostic copy of your tax file.  The diagnostic file will not contain personally identifiable information, only numbers related to your tax forms.  

If you would like to provide us with the diagnostic file, follow the instructions below and post the token number along with which version of TurboTax you are using and what states you are filing in a follow-up thread.  

Use these steps if you are using TurboTax Online:

• Sign in to your account and be sure you are in your tax return.
• Select Tax Tools in the menu to the left.
• Select Tools.
• Select Share my file with agent.
• A pop-up message will appear, select OK to send the sanitized diagnostic copy to us.
• Post the token number here. 

If you are using a CD/downloaded version of TurboTax, use these steps:

• Select Online at the top of the screen.
• Select Send Tax File to Agent.
• Click OK.
• Post the token number here.

[dmertz]

[Disregard this post.  I listed the wrong phaseout ranges.]

The $123,000 threshold for deductibility of the traditional IRA contribution only applies to the spouse that is not covered by a workplace retirement plan.  The phase-out of the deduction for a traditional IRA contribution made by the spouse who is covered by a workplace retirement plan is a Modified AGI occurs between $77,000 and $87,000.

If the wrong spouse is being subjected to the lower phase-out range, make sure that you have marked the W-2 as belonging to the correct spouse.

[tez15]

That is not how I read the guidance.  I am married filing jointly, the limits you listed are for a single filer with a retirement plan.  I cut and pasted the paragraph below from IRS Publication 590A.  Again, I think turbotax is calculating this incorrectly, but I understand that you are experts in this field and I am not.  What am I missing?

Modified AGI limit for traditional IRA contributions. For 2024, 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 $123,000 but less than $143,000 for a married couple filing a joint return or a qualifying surviving spouse,

• More than $77,000 but less than $87,000 for a single individual or head of household, or

• Less than $10,000 for a married individual filing a separate return.

[tez15]

9411826064046511-71753867

[tez15]

I posted the token number but it is showing as phone number removed phone number removed7.  Please let me know if you received it, and if not, instructions on how to post it (get it to you).  Thank You.

[VolvoGirl]

You can post a screenshot of it.  

[dmertz]

@tez15 , you are correct that I listed the wrong phase out ranges.  It seems that I had a flashback to the days when the MAGI ranges were lower and read the table wrong.  You can disregard my post.

[AnnetteB6]

Thank you for providing your token file.  After taking a closer look I can see that the key to the reduction in your allowed Traditional IRA deduction is the Modified Adjusted Gross Income (MAGI).  When one spouse is covered by a retirement plan at work, the full deduction is allowed if the MAGI is less than $123,000 as you stated in your question.  

Even though your AGI is under the $123,000 limit, your MAGI is not.  

The MAGI is your AGI without taking into account:

• IRA deduction.
• Student loan interest deduction.
• Foreign earned income exclusion.
• Foreign housing exclusion or deduction.
• Exclusion of qualified savings bond interest shown on Form 8815.
• Exclusion of employer-provided adoption benefits shown on Form 8839.

In your case, your MAGI is your AGI plus your IRA deduction, which puts your MAGI over the $123,000 limit and causes the partial phase-out of your deductible IRA contribution.

You can look for the IRA Worksheet that is part of your return to see the limitation as it is applied to your contribution.

For further information, see the following information from the IRS with regard to calculating the MAGI:

Modified Adjusted Gross Income for IRA deductible contributions

@tez15 

[tez15]

Thank you, I found the MAGI in the forms although I needed your explanation to calculate the number.  I appreciate your help.