Question

In 2018, Elizabeth and Daniel (both age 40), a married couple with AGI of $118,000, file a joint tax return. They each contributed $5,500 to their IRAs.

a.      How much can they deduct if they are active participants in qualified retirement plans?

b.      How much can they deduct if Elizabeth is not an active participant in a qualified retirement plan, but Daniel is an active participant in his qualified retirement plan?

c.     How would your answer change if they are both active participants in qualified retirement plans but their AGI is $200,000?

Answer 1

SOLUTION :

a. In 2018 , since Elizabeth and Daniel (aged 40) married couple

For 2015, 2016, 2017 and 2018, your total contributions to all of your traditional and Roth IRAs cannot be more than:

• $5,500 ($6,500 if you’re age 50 or older), or
• your taxable compensation for the year, if your compensation was less than this dollar limit.

And are both active participant in qualified retirement plans they can have partial deduction for income   more than $101,000 but less than $121,000.

And the AGI filed is $118,000. So they can have a partial deduction as they are both active participants.

b. Similarly , even in this case Elizabeth is not an active participant and still Daniel is an active participant in the qualified retirement plan so similarly , the contribution will be as

As in 2018, your total contributions to all of your traditional and Roth IRAs cannot be more than:

• $5,500 ($6,500 if you’re age 50 or older), or
• your taxable compensation for the year, if your compensation was less than this dollar limit.

And since the AGI is $118,000 and Elizabeth is not a active participant the deduction is only a partial deduction.

c. Well in the case where both are active participants in qualified retired plans and their AGI is $200,000 they won't be allowed any deduction as in there will be no deduction.

My answer changes for this one as the AGI for last two option was $118,000 and but for this one it is $200,000 and if married filing jointly with a spouse who is covered by a plan at work with an AGI OF $199,000 or more there will be no deduction allowed.

Hope I was able to help with with this solution.

If you like my answer please give a thumbs up.

​​​​​​