Question

John and Elizabeth have come to you for the following tax advice. They file jointly and have an Adjusted Gross Income of $150,000. They are both 52 years-old and active participants in their employer's retirement plan. They are trying to decide whether they should contribute to a Traditional or Roth IRA. They also want to know the maximum they can contribute to either the Traditional IRA or the Roth IRA. When researching these questions refer to your text book and Pub. 590A. Page 5 of Pub. 590A is extremely helpful. A. What is the maximum they can contribute to either IRA? Note where you found your answer either in Pub. 590A or your text book. B. If they contribute to the traditional IRA how much would they be able to deduct on their 2019 tax return? Note where you found your answer either in Pub. 590A or your text book.

Answer 1

Answer A: The maximum annual contribution limit for 2019 is $7,000 if the age is 50 or older ( in case of traditional IRA). So, maximum contribution is $7000 in this case.

The maximum annual contribution limit for 2019 is $6,000 and if the age is 50 or older then $1000 can be added which makes a total of $7000 ( in case of Roth IRA if AGI is less than $1,93,000, the roth IRA contribution can be made). So, maximum contribution is $7000 in this case.

The combined annual contribution limit for Roth and traditional IRAs is $7,000 if the age is 50 or older in 2019.

Answer B: If they contribute to the traditional IRA then they can't have a deduction on their 2019 tax return. (Explanation- If married filing jointly and the annual gross income is equal to or exceeds $1,23,000, then no deduction is allowed in case of traditional ira contribution)

Answer C:- If they contribute to the Roth IRA then they can't have a deduction on their 2019 tax return. (Explanation- Roth IRA contributions are't tax deductible)

Answer D:- John and Elizabeth can contribute entire $7000 to traditional IRA or to Roth IRA or split up in such a way that the total contribution is restricted to $7000. Hence, in both the cases the contributions aren't tax deductible.