9.3 Robin and Robbie, both age 45, are married and filed a joint return for 2013
ID: 2418651 • Letter: 9
Question
9.3 Robin and Robbie, both age 45, are married and filed a joint return for 2013. Robbie earned a salary of $90,000 in 2013 and is covered by his employer’s 401(k) plan. Robbie and Robin earned interest of $30,000 in 2013 from a joint savings account. Robin is not employed, and the couple had no other income. On April 15, 2014, Robbie contributed $5,500 to an IRA for himself and $5,500 to and IRA for Robin. The maximum allowable IRA deduction on the 2013 joint return is: Please show work for full credit.
a. $1,500
b. $5,500
c. $4,500
d. $11,000
Explanation / Answer
Whether you can deduct IRA contributions on your tax return depends on the type of IRA you have, your participation in an employer-sponsored retirement plan, and your income.
If married filing jointly, the maximum tax deductible contribution phases out once your income exceeds $181,000 and you become ineligible for a tax deduction when your income reaches $191,000. In other words, if income is below these levels ($60,000 for singles and $181,000 for married couples filing jointly), you can make the maximum contribution and it will be fully deductible. The maximum contribution for 2014 is $5,500, but taxpayers who are 50 . If your income is in between these levels ($60,000 to $70,000 for singles and $181,000 and $191,000 for married couples filing jointly), your contribution will be partially deductible, and if it is above these levels ($70,000 for singles and $191,000 for married couples filing jointly), it is not tax deductible at all.
If you’re married filing separately, the tax deduction limits are drastically lower regardless of whether you or your spouse participate in an employer-sponsored retirement plan. If your income is less than $10,000, you can take a partial deduction; once you hit $10,000, you don’t get any deduction
so that contribute to a traditional IRA even if you participate in an employer-sponsored retirement plan, but in some cases not all of your traditional IRA contributions will be tax deductible. In addition, your combined total contributions to both a Robin and Robbie and traditional IRA can’t exceed the annual limit of $5,500 in 2014
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