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skanthakumar-hot
New Member

Received unemplyment benefit. Once we subtract the $10200 the AGI is below the IRA limit but program is not allowing to deduct IRA

We received unemployment benefit last year.  Before deducting $10,200 our AGI was larger than IRA deduction limit. Now it is below the IRA limit once we subtract the $10,200. However TurboTax is not allowing me to deduct that.  What is the issue?
2 Best answer

Accepted Solutions
dmertz
Level 15

Received unemplyment benefit. Once we subtract the $10200 the AGI is below the IRA limit but program is not allowing to deduct IRA

TurboTax is behaving correctly.  Section 9042(b)(5) of The American Rescue Plan Act of 2021 requires the calculation of MAGI for this purpose to add back the exclusion for unemployment benefits.

View solution in original post

dmertz
Level 15

Received unemplyment benefit. Once we subtract the $10200 the AGI is below the IRA limit but program is not allowing to deduct IRA

Section 9042(b):

 

(b) Conforming Amendments.—

(1) Section 74(d)(2)(B) of the Internal Revenue Code of 1986 is amended by inserting “85(c),” before “86”.

(2) Section 86(b)(2)(A) of such Code is amended by inserting “85(c),” before “135”.

(3) Section 135(c)(4)(A) of such Code is amended by inserting “85(c),” before “137”.

(4) Section 137(b)(3)(A) of such Code is amended by inserting “85(c)” before “221”.

(5) Section 219(g)(3)(A)(ii) of such Code is amended by inserting “85(c),” before “135”.

(6) Section 221(b)(2)(C)(i) of such Code is amended by inserting “85(c)” before “911”.

(7) Section 222(b)(2)(C)(i) of such Code, as in effect before date of enactment of the Taxpayer Certainty and Disaster Tax Relief Act of 2020, is amended by inserting “85(c)” before “911”.

(8) Section 469(i)(3)(E)(ii) of such Code is amended by striking “135 and 137” and inserting “85(c), 135, and 137”

View solution in original post

7 Replies
ee-ea
Level 13

Received unemplyment benefit. Once we subtract the $10200 the AGI is below the IRA limit but program is not allowing to deduct IRA

The IRS needs to rule on this question," Is AGI with or without the 10,200 UE subtraction ?"

flytiger
Level 1

Received unemplyment benefit. Once we subtract the $10200 the AGI is below the IRA limit but program is not allowing to deduct IRA

Your contributions to IRA's must equal or be less than your earned income.

dmertz
Level 15

Received unemplyment benefit. Once we subtract the $10200 the AGI is below the IRA limit but program is not allowing to deduct IRA

TurboTax is behaving correctly.  Section 9042(b)(5) of The American Rescue Plan Act of 2021 requires the calculation of MAGI for this purpose to add back the exclusion for unemployment benefits.

View solution in original post

skanthakumar-hot
New Member

Received unemplyment benefit. Once we subtract the $10200 the AGI is below the IRA limit but program is not allowing to deduct IRA

This makes sense.  However, I am unable to find Section 9042(b)(5).  There is no (5) in Section 9042(b)

dmertz
Level 15

Received unemplyment benefit. Once we subtract the $10200 the AGI is below the IRA limit but program is not allowing to deduct IRA

Section 9042(b):

 

(b) Conforming Amendments.—

(1) Section 74(d)(2)(B) of the Internal Revenue Code of 1986 is amended by inserting “85(c),” before “86”.

(2) Section 86(b)(2)(A) of such Code is amended by inserting “85(c),” before “135”.

(3) Section 135(c)(4)(A) of such Code is amended by inserting “85(c),” before “137”.

(4) Section 137(b)(3)(A) of such Code is amended by inserting “85(c)” before “221”.

(5) Section 219(g)(3)(A)(ii) of such Code is amended by inserting “85(c),” before “135”.

(6) Section 221(b)(2)(C)(i) of such Code is amended by inserting “85(c)” before “911”.

(7) Section 222(b)(2)(C)(i) of such Code, as in effect before date of enactment of the Taxpayer Certainty and Disaster Tax Relief Act of 2020, is amended by inserting “85(c)” before “911”.

(8) Section 469(i)(3)(E)(ii) of such Code is amended by striking “135 and 137” and inserting “85(c), 135, and 137”

View solution in original post

fanfare
Level 15

Received unemplyment benefit. Once we subtract the $10200 the AGI is below the IRA limit but program is not allowing to deduct IRA

Does the exclusion get added back for purposes of 
EIC and,

Retirement Savings Contribution credit ?

 

Both are going up on my niece's tax return.

dmertz
Level 15

Received unemplyment benefit. Once we subtract the $10200 the AGI is below the IRA limit but program is not allowing to deduct IRA

fanfare, no.  Changes to sections 25B and 32 are not mentioned.

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