IRA deduction

[dosmom1234]

My wife was laid off in 2020 but had a 401k plan at that job.  After her layoff she kept the money in the plan.  There are income limits when one or both spouses are covered by a 401k plan.  Since she was laid off would she still be considered to be covered by a 401k plan for 2020?

[dmertz]

It doesn't matter how long she was an active participant in a 401(k) plan in 2020.  If she was an active participant in a 401(k) plan at any time in 2020, she is an active participant for 2020 and the deduction for your and your spouse's traditional IRA contributions for 2020 will be subject to limitation based on MAGI.  Active participation in an employer's retirement plan is indicated on the W-2 issued by that employer by the marking of box 13 Retirement plan.