IRA contibution non deductible issue

[hhttt]

I have earned income from schedule C.  I have no retirement plan at work nor does my spouse (we have no w2 wages) therefore there is no income (MAGI) limitation.  Turbotax is considering my IRA contribution nondeductible which seems to be an error.

[LaShaunA3]

If the contribution is being treated as nondeductible, verify that the “covered by a retirement plan at work” box is marked No for both spouses in the IRA contribution section of the software. Also, confirm that your net Schedule C earnings (after the deductible half of SE tax) exceed the contribution. 

Contributions to Individual Retirement Arrangements (IRAs)

[hhttt]

Both boxes remain unchecked for retirement at work.  I owe no SE taxes due to schedule F losses.  Schedule C has net taxable income.  Is that perhaps the issue???? the combination of Sch C and Sch F????

[DianeW777 · Accepted solution]

Yes, that is the issue. An overall net loss between your Schedule C and Schedule F provides no earned income for an IRA contribution. It's very important because you need to remove the contribution(s) before April 15th to avoid any penalty. Be sure to remove any of the income earned on the amount withdrawn as well because it would be considered part of the excess.

For 2025 and 2024, the total contributions you make each year to all of your traditional IRAs and Roth IRAs can't be more than:

• $7,000 ($8,000 if you're age 50 or older), or
• If less, your taxable compensation for the year

Tax on excess IRA contributions

An excess IRA contribution occurs if you:

• Contribute more than the contribution limit.

Excess contributions are taxed at 6% per year for each year the excess amounts remain in the IRA. The tax can't be more than 6% of the combined value of all your IRAs as of the end of the tax year.

To avoid the 6% tax on excess contributions, you must withdraw:

• the excess contributions from your IRA by the due date of your individual income tax return (including extensions); and
• any income earned on the excess contribution.

@hhttt 

[hhttt]

Thanks.  I have begun the process to withdraw the nondeductible contributions.