Question

on February​ 14,2020, John who is single and age​ 30, establishes a traditional IRA and contributes $6,000 to the account. John​'s adjusted gross income is $73,000 in 2019 and $59,500 in 2020.John is an active participant in an​ employer-sponsored retirement plan.

i Requirements a. What amount of the contribution is deductible? In what year is it deductible? b. How is the deduction (if any) reported (i.e., for AGI or from AGI)? c. How would your answer to Part a change, if at all, if John were not an active participant in an employer-sponsored retirement plan? d. How would your answer to Part a change if John were married and files a joint return with his spouse, who has no earned income? (Assume their combined AGI is $97,000.)

Answer 1

a. John is participating in 401(k) plan ,his AGI is $73,000 for 2019, and so he can claim the contribution made on 14 February 2020 in the year 2019 for $600 (due date is April 15)

b. It can be claimed partially for a single Tax payer with $73,000 Adjusted Gross Income

c. If John were not an active participant of an employer - sponsored retirement plan full amount of $6,000 can be claimed

d. if John is marries and files jointly, the combined income is $97,000 is less than $193,000 full deduction can be claimed

- John can also claim the IRA contribution made for 2020, In this scenario $7,000 can be claimed as deduction for a single tax payer