topic Traditional IRA Contribution in Get your taxes done using TurboTax

Traditional IRA Contribution

jon79 — Fri, 26 Feb 2021 00:06:37 GMT

Me (and spouse) are both 60 without a retirement plan at work, so we qualify for max $7000 each Traditional IRA contribution. However, part of the 2020 year (Jan-Aug) I did work for an employer with a 401k retirement plan and I participated in that plan. Do I qualify for benefits of this max contribution level given I presently do not work for an employer with with a retirement plan? TurboTax only asks me about present employer and when I answer that question it indicates I qualify but want to confirm the earlier year employment doesn't change that eligibility. Thank you!

Re: Traditional IRA Contribution

DaveF1006 — Fri, 26 Feb 2021 00:26:06 GMT

According to this IRS link, you are fully covered for MFJ if you make less than $104,000, partially covered if between $104K-$124K, and not covered if your income is over $124K. Tis is for the year 2020.

Re: Traditional IRA Contribution

jon79 — Fri, 26 Feb 2021 00:56:11 GMT

Thanks for reply Dave. The #s you reference are pertinent if working for an employer that has a retirement plan. Part of the 2020 year I did work for an employer with a retirement plan and the last part of 2020 I worked for an employer that does not have a retirement plan at work. I am trying to find out which part of the year takes precedence when determining eligibility, that earlier part when I worked for an employer with a retirement plan or the way I finished 2020, working for an employer without a retirement plan. Thanks again!

Re: Traditional IRA Contribution

fanfare — Fri, 26 Feb 2021 01:02:29 GMT

With any one of your W-2s showing "retirement plan" checked,

your deductibility may be limited because of that.

Re: Traditional IRA Contribution

DawnC — Fri, 26 Feb 2021 02:23:21 GMT

If you were covered by a retirement plan at work, even for 1 day at any employer, you should mark Yes to that question. Whether or not it affects your deductions depends on your modified adjusted gross income. For 2020, the total contributions you make each year to all of your traditional IRAs can't be more than:

$6,000 ($7,000 if you're age 50 or older), or
If less, your taxable compensation for the year

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 (at any point during 2020) and your income exceeds certain levels.

If you're covered by a retirement plan at work, use this table to determine if your modified AGI affects the amount of your deduction. If it is less than $104,000 and you are Married Filing Jointly, you can take the full deductions.