Question

. Mr. and Mrs. DM file a joint tax return. They are both under the age of 50. Each spouse contributed $6,000 to a traditional IRA. In each of the following cases, compute the deduction for these contributions. The AGI in each case is before any deduction.

a) Neither spouse is an active participant in a qualified retirement plan and their AGI is $140,000.

b) Mr. DM is an active participant in a qualified retirement plan but Mrs. DM is not. Their AGI is $130,000.

c) Both spouses are active participants and their AGI is $39,000.

d) Mr. DM is self-employed and does not have a retirement plan. Mrs. DM is an active participant. Their AGI is $105,000.

Answer 1

The maximum limit to contribute to the traditional IRA in 2019 is $6,000 if age under 50, otherwise $7,000.

Deduction for Traditional IRA contribution by married jointly filing in the following cases:

Activity Status	Adjusted Gross Income (AGI)	Deduction
Both are not actively participated in a qualified retirement plan	No limit	Full deduction
Both the persons actively participate in a qualified retirement plan	$103,000 or less	Full deduction
Both the persons actively participate in a qualified retirement plan	$103,000< X < $123,000	Proportionate deduction
Both the persons actively participate in a qualified retirement plan	$123,000 or more	No deduction
One person is active and another one is inactive in the plan	$193,000 or less	Full deduction
One person is active and another one is inactive in the plan	$193,000 < X < $203,000	Proportionate deduction
One person is active and another one is inactive in the plan	$203,000 or more	No deduction
In case filing separately	$10,000 or more	No deduction

Cases :

1. Neither spouse is an active participant in a qualified retirement plan and their AGI is $140,000:

In the above case, neither of spouse is inactive so no limit of AGI for getting deduction. Total amount of contribution to traditional IRA can get deduction i.e., $12,000 ($6,000* 2).

Total deduction allowed -           $12,000

2. Mr. DM is an active participant in a qualified retirement plan but Mrs. DM is not. Their AGI is $130,000:

In this case, individual is active but individual’s spouse is not active in a retirement plan. And their AGI is $130,000 then they get the full deduction since their AGI is less than $193,000 as per the above rules.

Total deduction allowed -           $12,000

3. Both spouses are active participants and their AGI is $39,000:

In the given case, both jointly return filers are active participants and their AGI is less than $103,000 so they get full deduction of total contribution amount.

Total deduction allowed -           $12,000

4. Mr. DM is self-employed and does not have a retirement plan. Mrs. DM is an active participant. Their AGI is $105,000:

In this case, both the persons are not able to file jointly since one is self-employed and another one is in employment then they file return separately, in such case for self-employed person get full deduction (i.e., $6,000) and for employed person that is spouse of individual get no deduction since AGI is more than $10,000.

Total deduction allowed -           $6,000 only for self-employed person’s contribution