topic IRA in Deductions & credits

IRA

Koreelee66 — Sun, 03 Jan 2021 01:25:34 GMT

My wife lost her job this Summer (July 2020) and she was covered by the retirement system up to the last day . If she contribute to her IRA account can we still get the deduction since our total income this year are $150k together ?.

Re: IRA

Mike9241 — Sun, 03 Jan 2021 01:36:08 GMT

were you covered by an employer retirement plan?

Re: IRA

macuser_22 — Sun, 03 Jan 2021 01:39:44 GMT

For 2020, she can contribute (assuming that you have sufficient compensations to do so) but it would not be deductible since your MAGI would be over the $124,000 cut off amount when covered by a retirement plan.

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

Assuming that for 2021 she will not be covered * then if the contribution is for 2021 there is no limit unless yiu are covered then the MAGI for her would be $198K.

*Some retirement plans do not work on a calendar year so there is a chance that the plan could extend into 2021 and if covered in 2021, even if for a day, the cut off limit would apply to 2021 also.

Re: IRA

Koreelee66 — Sun, 03 Jan 2021 02:22:32 GMT

Yes I was cover and I contributed to 401k .

Re: IRA

dmertz — Sun, 03 Jan 2021 02:31:57 GMT

Under these circumstances, neither of you is eligible to deduct a traditional IRA contribution. However, it appears that each of you would be eligible to contribute to separate Roth IRAs. You wouldn't get a deduction for those contributions, but growth in the Roth IRA would be tax-free rather than tax-deferred once the requirements for qualified distributions has been met, and that can be of greater benefit than a deduction for a traditional IRA contribution even if you were eligible for that deduction.