IRA Deduction in Turbo Tax

[bones55]

I am not covered by an employer retirement plan and made over $124,000 in 2020.

I thought I could still contribute $7,000 to an IRA and take the deduction. TurboTax is not allowing the deduction though.

Am I wrong about being able to contribute/deduct?

Thanks!

[DanaB27 · Accepted solution]

Yes, if you were not covered by a retirement plan at work and had no spouse/ your spouse wasn't covered by a plan then you can deduct the full amount. 

If you are filing married filing jointly and your spouse was covered by a plan then you deduction will be limited if your modified adjusted gross income (MAGI) is over $196,000.

Please see IRA Deduction if You ARE Covered by a Retirement Plan at Work - 2020 and IRA Deduction if You Are NOT Covered by a Retirement Plan at Work - 2020  for details.

Please check your W-2 box 13 if Retirement Plan is checked or anything in box 12 indicates that you had a retirement plan at work:

1. Login to your TurboTax Account 
2. Click on the Search box on the top and type “W-2”
3. Click on “Jump to W-2”

Please be aware, even if you are not allowed to deduct the traditional IRA contribution you can still make the contribution. You will have to track the nondeductible contribution on Form 8606 and later when you get distributions some of your distribution will be tax-free because of this basis (nondeductible part).

[bones55]

Thank you very much! I had an incorrect entry in Box 12.

[TaxGal7]

I have a w2 that shows a final payout including 403b contribution for 1 month in 2021. My primary employment is not phase out level and my IRA deduction is 100% deductible. Flaw in Turbotax software refuses to allow full IRA deduction in Turbotax SE Online.  How can I edit my 1040 to reflect this deduction and correct AGI? Or am I forced out of e-file into mail return?