IRA deductions

[TaxUser 2022]

I was covered thru employer 401k from April to July of last  Year and after that rolled over the money to my IRA.at the same time have made $6000.00 to the Traditional  IRA for deduction. spouse also was enrolled in 401k plan for 3 months in 2021.but when I claim the IRA  deduction for $6000.00 it is giving the message that as the Modified Adjusted Gross income is greater than 125000  I cannot claim the $6000.00 deductible for IRA contributions. Please advise.

[DanaB27]

Yes, the deduction may be limited if you or your spouse is covered by a retirement plan at work and your income exceeds certain levels. Please see IRA deduction limits for details.

You still can make the contribution but will have to keep track of your basis (nondeductible contribution) on Form 8606.

[TaxUser 2022]

When I complete the forms on Turbtax it does not have a section to complete Form 8606? I was just wondering if each one of us were in the 401k plan for 3 months and I contributed to the IRA  and my income is less than the 125k MAGI limit will the deduction still not apply?

[MarilynG1]

Yes, your traditional IRA contributions are deductible.  Click this link for more detail on IRA Contributions.

If you contributed to a 401K through your employer, this shows on your W-2 (Code D in Box 12) and TurboTax picks up this info automatically, so you don't need to enter it anywhere else .  

Form 8606 tracks your 'non-deductible' contributions, so you don't need one for your situation, if you contributed to a Traditional IRA.

This link has detailed info on Form 8606.

[TaxUser 2022]

Just to confirm what does MAGI include does it include spouse income as well?when I mentioned my income is less than $125k it was only my w2 income? because looks like if MAGI is less than 125k when either spouse or me is enrolled in IRA deductions are applicable? is it so please advise.

[MarilynG1]

Yes, if you are filing jointly, your MAGI includes both of your incomes.  

To calculate your modified adjusted gross income (MAGI), take your AGI and "add-back" certain deductions

Your AGI (Adjusted Gross Income) is on Line 11 of Form 1040.  

Click this link for more info on Calculating AGI/MAGI.

As @DanaB27 pointed out above, your IRA Contribution deduction may be limited if you or your spouse contributed to a retirement plan at work.  

TurboTax calculates if any portion of your contribution is 'non-deductible' and generates Form 8606 for you in that case.