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1. Who can contribute to a traditional IRA, and how much? Nick, age 53, is single...

1. Who can contribute to a traditional IRA, and how much? Nick, age 53, is single and has AGI of $67,000. He contributes $5,000 to his IRA in 2018. How much can Nick deduct if he is not covered by an employer-sponsored qualified retirement plan? How much can Nick deduct if he is covered by an employer-sponsored qualified retirement plan?

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Expert Solution

Who can contribute to a traditional IRA, and how much?

Everyone can contribute to traditional IRA. If anyone age is under 50, total yearly contributions can't exceed $5,500. If age is 50 or over, total yearly contributions can't exceed $6,500 (additional $1,000 as a catch up contribution). If anyone has more than one IRA, the total contribution to all IRAs combined cannot exceed the annual limit.

Nick contribution:-

If Nick is not covered by an employer-sponsored qualified retirement plan. His eligible deduction will be maximum to $6,500. However, he has contributed $5,000. So, he will get deduction of $5,000.

If Nick is covered by an employer-sponsored qualified retirement plan. He is eligible for partial deduction because his AGI of $67,000 is falling between the range of "> $63,000 but < $73,000". So, his maximum eligible deduction is $3,900 ($6,500*60%). However, he has contributed $5000. So, he will get deduction of 3,000 ($5,000*60%)

ekkarill92 answered 1 year ago
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