topic My spouse made nondeductible IRA contribution...we have high AGI and TT calculates an excess contribution. Why so if this is a traditional IRA? in Retirement tax questions

My spouse made nondeductible IRA contribution...we have high AGI and TT calculates an excess contribution. Why so if this is a traditional IRA?

jwil3-jwil3 — Sat, 01 Jun 2019 15:49:49 GMT

My spouse made nondeductible IRA contribution...we have high AGI and TT calculates an excess contribution. Why so if this is a traditional IRA?

The IRA contribution interview will tell you the reason t...

macuser_22 — Sat, 01 Jun 2019 15:49:51 GMT

The IRA contribution interview will tell you the reason that it is excess - what does it say?

Is your spouse age 70 1/2 or older?

Your AGI has no effect on the amount that you are permitt...

dmertz — Sat, 01 Jun 2019 15:49:53 GMT

Your AGI has no effect on the amount that you are permitted to contribute to a traditional IRA. It only potentially affects the amount of that contribution you can deduct on Schedule 1 line 32 rather than treat as nondeductible on line 1 of Form 8606.

IRS Publication 590-A at pages 8-9 makes it clear that th...

Jim-S — Sat, 01 Jun 2019 15:49:57 GMT

IRS Publication 590-A at pages 8-9 makes it clear that the annual limit extends to nondeductible as well as deductible contributions to a traditional IRA. As to why? I would suggest that, even though there is no upfront deduction, there is still a tax benefit in years after the nondeductible contribution is made. You're not required to pay tax on growth of the investment until it is taken out of the IRA. Assuming investment in mutual funds, you have to pay tax on required annual income distributions if that investment is not in an IRA. Having no limit on nondeductible contributions would place no limit on the ability to defer tax on such investment income. HTH