topic 401k + IRA + Spousal IRA Deductions in Deductions & credits

401k + IRA + Spousal IRA Deductions

Anonymous — Sun, 29 Nov 2020 03:30:47 GMT

I am married filing jointly. I make <$100k after 401k. I made a spousal traditional IRA and funded the full $6k. My spouse does not work. If I do a traditional IRA for myself can I fund, and deduct, $6k (for a total of $12k between the two of us) or can I only deduct one of the $6k IRAs?

Re: 401k + IRA + Spousal IRA Deductions

macuser_22 — Sun, 29 Nov 2020 03:57:36 GMT

See the link below: $100K is below the phase out for deductions so both you and your spouse can deduct the maximum allowable contribution which would be $12,000 if under age 50.

The maximum IRA contributions for 2019 is $6,000, or $7,000 if you’re age 50 or older by the end of the year; or your taxable compensation for the year which ever is less.

(Taxable compensation is generally wages that you worked for - W-2 or net self-employed income minus the deducible part of the SE tax, but can include commissions, certain alimony and separate maintenance, and nontaxable combat pay ).

See IRS Pub 590A "What is compensation" for details:
https://www.irs.gov/publications/p590a#en_US_2018_publink1000230355

See this IRS link for Traditional IRA deduction limits when covered by a retirement plan at work.

https://www.irs.gov/Retirement-Plans/IRA-Deduction-Limits

Re: 401k + IRA + Spousal IRA Deductions

Anonymous — Sun, 29 Nov 2020 16:48:55 GMT

That's what it looks like to me but I have received conflicting responses and can't find a definitive answer or example about it. Most people say only my wife's IRA will be deductible since I have a 401k.

Thank you for the reply.

Re: 401k + IRA + Spousal IRA Deductions

macuser_22 — Sun, 29 Nov 2020 17:12:49 GMT

@Anonymous wrote:

That's what it looks like to me but I have received conflicting responses and can't find a definitive answer or example about it. Most people say only my wife's IRA will be deductible since I have a 401k.

Thank you for the reply.

The "definitive answer " is in the IRS publication I posted the link to - what the IRS says, not what "responses" have said. In your case you said that you are covered bu a 401(k) and your spouse does not work. If your MAGI will be less then $100K then the IRS chart for not cover by a retirement plan at work but spouse is covered will apply. The chart shows that for 2020, as long as the MAGI on the joint return is less than $196K then the spouse gets a full deduction (for 2021 that amount is less than $198K).

https://www.irs.gov/retirement-plans/2021-ira-deduction-limits-effect-of-modified-agi-on-deduction-if-you-are-not-covered-by-a-retirement-plan-at-work

============= 2021 chart from IRS pub.============

If you're not covered by a retirement plan at work, use this table to determine if your modified AGI affects the amount of your deduction.

If Your Filing Status Is...	And Your Modified AGI Is...	Then You Can Take...
single, head of household, or qualifying widow(er)	any amount	a full deduction up to the amount of your contribution limit.
married filing jointly or separately with a spouse who is not covered by a plan at work	any amount	a full deduction up to the amount of your contribution limit.
married filing jointly with a spouse who is covered by a plan at work	$198,000 or less	a full deduction up to the amount of your contribution limit.
	more than $198,000 but less than $208,000	a partial deduction.
	$208,000 or more	no deduction.
married filing separately with a spouse who is covered by a plan at work	less than $10,000	a partial deduction.
	$10,000 or more	no deduction.
If you file separately and did not live with your spouse at any time during the year, your IRA deduction is determined under the "Single" filing status.