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Problem 5-4 Individual Retirement Accounts (LO 5.3) Phil and Linda are 25-year-old newlyweds and file a joint tax return. Lin
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Answer #1

Answers:

a.

Phil $6,000

Linda $6,000

b.

Phil $6,000

Linda $0

Explanations:

There are two principal types of IRAs in the U.S. tax law. One is the traditional IRA and the other is the Roth IRA. Annual contributions to a traditional IRA are deductible, and retirement distributions are taxable. The annual deduction maximums are reduced for traditional IRAs if the taxpayer is an active participant in another qualified retirement plan.

Maximum amount of their deductible contributions to a traditional IRA for 2019 is $6,000 ($7,000 for age 50 pr older) OR your taxable compensation for the year, if your compensation was less than this dollar limit.

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