4. Joe is 36 years old, had Salary of $ 50,000 and a modified AGI of...

4. Joe is 36 years old, had Salary of $ 50,000 and a modified AGI of $ 66,000. a. What is the maximum amount Joe may contribute to a Traditional IRA? b. What is the Maximum amount Joe deduct for (a) above if he is not covered by a retirement plan at work? c. What is the Maximum amount Joe deduct for (a) above if he participates in a retirement plan at work?

Expert Solution

(A) What is the maximum amount Joe may contribute to a Traditional IRA

Joe is aged less than 50 years so he can contribute maximum up to $5500 or up to his income which is lower for the year 2017 towards traditional IRA. So joe can contribute $5500 towards IRA.

(B) What is the Maximum amount Joe deduct for (a) above if he is not covered by a retirement plan at work

Deduction will be allowed in full to joe of amount (a) above i.e. $5500 if he is not participating in retirement plan at work. so joe can deduct upto $5500 for traditional IRA.

(C) What is the Maximum amount Joe deduct for (a) above if he participates in a retirement plan at work

Deduction can be full, partial or nil if joe participating in a retirement plan at work. Since Modified AGI (MAGI) is between range of $62000 to $72000 so a partial deduction will be allowed to joe for contribution towards IRA in year 2017 and it will be as follows.

Partial Deduction = (Maximum of range - MAGI) x (Maximum Contribution / (The phase of range))

Partial Deduction = (72000 - 66000) x (5500 / (72000 - 62000))

Partial Deduction = 6000 x (5500 / 10000)

Partial Deduction = 6000 x 0.55

Partial Deduction = $ 3300

So Joe can deduct $ 3300 for contribution towards traditional IRA for year 2017.

ekkarill92 answered 1 year ago

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