Question

On February​ 14, 2020​, Jason​, who is single and age​ 30, establishes a traditional IRA and contributes $6,000 to the account. Jason​'s adjusted gross income is $69,000 in 2019 and $60,500 in 2020. Jason is an active participant in an​ employer-sponsored retirement plan.

1. What amount is deductible in 2019?

a. As an alternative, Jason can elect to treat the IRA contribution as made for 2020, in this scenario how much could he deduct?

2. How would your answer to part 1 change if Jason were not an active participant in an employer-sponsored retirement plan?

3. How would your answer to part 1 change if Jason were married filing jointly assuming the AGI is $95,500?

Answer 1

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Solution: Answers are highlighted in yellow: As per Tax year 2019 wage limit, answer will be different for different year: In case, active participant in anemployer-sponsored retirement plan: 1) Deduction limit for 2019 before phaseout Less: Phaseout (69000-64000)/10000*6000 Amount is deductible in 2019 $ $ $ 6,000 3,000 3,000 a) Alternative, as contributed for 2020: $ 6,000 Deduction limit for 2020 before phaseout Less: Phaseout (60500-64000)/10000*6000 Amount is deductible in 2020 a) $ 6,000 2) In case, NOT an active participant in anemployer-sponsored retirement plan: Then, no Income phaseout limit apply: Deduction limit for 2019 $ 6,000 Less: No Phaseout require Amount is deductible in Part 1 $ 6,000 3) In case, MF) with AGI $95,500: Deduction limit for 2019 Less: Phaseout begins from $103000 Amount is deductible in Part 1 $ $ $ 6,000 - 6,000