Question

In: Accounting

William is a single writer (age 35) who recently decided that he needs to save more...

William is a single writer (age 35) who recently decided that he needs to save more for retirement. His 2019 AGI before the IRA contribution deduction is $66,000

a If he does not participate in an employer-sponsored plan, what is the maximum deductible IRA contribution William can make in 2019?Maximum amount IRA Contribution=

b If he does participate in an employer-sponsored plan, what is the maximum deductible IRA contribution William can make in 2019?Maximum Deduction IRA Contribution=

c Assume the same facts as in part (b), except William’s AGI before the IRA contribution deduction is $76,000. What is the maximum deductible IRA contribution William can make in 2019?Maximum Deductible IRA Contribution=

Solutions

Expert Solution

Requirement a:-

William's AGI = $66,000

If William does not participate in an employer - sponsored plan, Per IRS, the maximum deductible IRA contribution that William can make in 2019 is $6,000. This $6,000 is the maximum limit that has been set forth by the Internal Revenue Serice(IRS)

Requiremnet b:-

If William does participate in an employer sponsored plan, the maximum deductible IRA contribution is calculated as :-

= (Adjusted Gross Income - Lower limit of phase out)/($Upper Limit of Phase out - $Lower limit of phase out) * Maximum Contribution

= (Adjusted Gross Income - $64,000)/($74,000 - $64,000) * Maximum Contribution

= ($66,000 - $64,000)/$10,000 * 6,000

= $2,000/$10,000 * 6,000

= 20% * $6,000

= $1,200

$6,000 - $1,200 = $4,800 maximum deduction IRA contribution.

Requirement c:-

Assuming the same facts in "b" and William's AGI before IRA contribution deduciton is $76,000, the maximum Deductible IRA contribution is "0" per IRS. For the tax year 2019, when an individual is covered by an employer sponsored plan, all income in excess of $74,000 will not be eligible to deduct any amounts in respect of the IRA contributions.

Maximum Deductible IRA contribution = 0

Please use the comments section should you have any questions.

ekkarill92 answered 1 year ago
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