Traditional IRA Contribution

[hogger61]

I contributed $7000 towards my traditional IRA and $7000 towards my wifes IRA. Turbotax says my MAGI is to high to receive the full deduction, that I can only deduct $7000. When I remove the deduction for my wife, my tax burden increases. Why is it telling me this?

[AamilD]

This is because when you initially enter the contribution, it lets you take a deduction for it which reduces your tax burden since but when you answer all the other questions including adding all you income and whether you and your spouse were covered by a Retirement Plan at Work, it makes a determination that your MAGI is too high and does not let you take a deduction which increases the tax burden.

Your traditional IRA contributions may be tax-deductible. The deduction may be limited if you or your spouse is covered by a retirement plan at work and your income exceeds certain levels.

• IRA deduction limits

[dmertz]

Presumably you are married filing jointly, otherwise your wife's IRA contribution (perhaps made by you on her behalf) would have nothing to do with your tax return.  It seems that your wife's IRA contribution is deductible and when you remove that deduction, your (joint) taxable income increases, reducing your refund or increasing your balance due.

[hogger61]

Yes, married filing jointly. If only $7000 is deductible, there should be no need for me to contribute to both IRAs, right? 

[dmertz]

If your $7,000 traditional IRA contribution would not be deductible, consider making a Roth IRA contribution instead.  The benefit of a Roth IRA contribution is that investment gains will be eventually tax free instead of just tax deferred.