Disallowed Non-working Spousal IRA Contribution

Forum|Forum|4 years ago
November 21, 2021
3 replies
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I am getting a head start on 2021 taxes using TurboTax 2021. I noticed that when I entered a deduction for a non-working spousal IRA contribution based on my salary income (we file MFJ), that TurboTax allowed the deduction for the Fed taxes, but disallowed it for the State of California taxes. Is a non-working spousal IRA contribution really not deductible on California taxes if the other spouse has a salary that exceeds their combined contribution and they file married jointly? That doesn't make sense to me. Or is this a bug in TurboTax?

Best answer by GaryP9

I figured it out. TurboTax is correct as is. It turns out that California law does not conform to Federal law on deductible IRA contributions for those over 70 1/2 (the SECURE Act repealed that age limit, but California doesn't recognize that change - at least not yet). My spouse is over 70 1/2 -- that is why her contribution is not deductible for California taxes. However it is still deductible for Fed taxes.

Critter-3

Level 15

Contributions to an individual retirement arrangement, or IRA, that you deduct on your federal income taxes are also deductible on your California state income taxes. However, you don't actually "take" an IRA deduction anywhere on your California tax return. The California return uses your federal adjusted gross income as a starting point for computing your state taxable income -- and your federal AGI already includes your IRA deduction.

Also the CA 2021 program is not available yet and what is will not be fully functional until sometime late January.

When will my forms be ready?

Historically, IRS tax forms start becoming available in January, with a few stragglers (most notably Form 1040X) getting finalized in February.

State tax forms can become available for filing any time between December and late February, depending on the state and the tax form.

For specific forms and dates, refer to the Forms Availability Table for your TurboTax product, see the related information below.

Can I Still Work On My Return Before My Forms are Ready?

Yes, according to the following:

Federal Taxes
You can still work on your return and finish most of it. Once your forms become available, we’ll create the forms and include all of your info.

You’ll only be able to e-file or print your return once the forms are available.

While you’re working on your return, we’ll ask if you want to receive email updates when your forms become available.

State Taxes
If your forms aren’t available, you’ll get a message asking you to return once they become available.

While you’re working on your return, you’ll have a chance to let us know you want to receive email updates when your forms become available.

Bsch4477

Level 15

What is line 19 of Sch 1 showing as an IRA deduction?

GaryP9Author

Level 3

It's actually line 20 of Schedule 1. That says $14,000.

GaryP9Author

Level 3

I already know that. TurboTax took our full $14,000 IRA contribution from the Fed form but then inserted a "Subtraction" of $7000 on the Adjustments to Income part of the California return with a note saying it is a disallowed IRA deduction. Thus my question as posted.

Bsch4477

Level 15

I think @Critter-3 has your answer. Too early to be sure the program has full functionality and the state program and forms have not yet been finalized.