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My husband is covered by a DB plan but I am not-can I contribute to an IRA in my name? Our combined income is 150000.

Dec 27, 2013 by danette from Avon, IN in  |  Flag
3 Answers  |  6 Followers
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7 votes
Peter C. Karp Level 20

Danette,

John and Larry have both responded as I would. You can always make a non-deductible traditional IRA contribution regardless of income. Since you have indicated that you are not covered by a retirement plan at work and if you file your taxes jointly, your IRA contribution would be fully deductible until your modified adjusted gross income reaches $178,000 for 2013. You may also want to consider making a Roth IRA contribution. You may call our office at 415-345-8185 or 877-900-Karp for more information on how an IRA or Roth IRA would fit into your overall investment plan. I would suggest that you also speak with your tax preparer or accountant to see what option makes the most sense for your particular situation. Best wishes for the New Year.

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Comment   |  Flag   |  Feb 03, 2014 from San Francisco, CA

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3 votes

Hi Danette,

You can contribute to an IRA in your name. The contribution limit for 2013 is $5,500 of earned income ($6,500 if you are age 50+) and is slated to remain the same for 2014.

The tax deductibility of the contribution will depend on a few parameters. You mentioned that your husband is active in a defined benefit pension plan, but that you are not. However, if you through your work are active in a defined contribution plan (i.e. 401(k), 403(b), SIMPLE IRA, etc), then the IRS applies the same limits as if you were active in a defined benefit plan.

If you are NOT active in any retirement plan through your work--and you file your taxes jointly as a couple--your IRA contribution is fully deductible (for 2013) until your Modified Adjusted Gross Income (MAGI) reaches $178,000. The amount you can deduct phases out between $178,000 and $188,000, at which point no deduction is allowed.

If you ARE active in a defined contribution plan through your work--and you jointly file as a couple--your IRA contribution would start losing tax deductibility at $95,000 of MAGI, with no deduction once you reached $115,000.

For many people, MAGI will be the same as their Adjusted Gross Income (AGI) at the bottom of page 1 of their federal tax return. However, MAGI is different from AGI in that it adds back a few items, such as student loan deductions, foreign income, foreign housing deductions, and so forth.

Hope this helps. Best wishes for a prosperous 2014!

3 Comments   |  Flag   |  Dec 27, 2013 from Clackamas, OR
John A. Frisch CPA/PFS, CFP®, AIF®, PPC

Larry,

Flag |  Dec 27, 2013 near Woodbridge, VA
John A. Frisch CPA/PFS, CFP®, AIF®, PPC

Larry, sorry. Didn't refresh the site before posting my response. I see mine is redundant :-) John

Flag |  Dec 27, 2013 near Woodbridge, VA
Larry McClanahan, CFP®, ChFC, CLU, CASL

No worries, John. Nice to know that I'm in good company! :-)

Flag |  Dec 27, 2013 near Clackamas, OR

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2 votes

Hi Danette,

Happy Holidays.

If you and your husband file your federal income tax return jointly then, yes, you can make an IRA contribution for 2013. You have until April 15, 2014 to do so.

In fact you can make either a deductible traditional IRA contribution or a non-deductible ROTH IRA contribution. Someone with earned income who is not covered by an employer provided retirement plan can make a deductible contribution to a traditional IRA if their combined modified adjusted gross income is less than $178k in 2013. If modified AGI is above $178k but below $188k the deductibility of the contribution is phased-out. For example, at $183k of modified AGI you could deduct ½ of your IRA contribution. The other half would be non-deductible.

You can always make a non-deductible traditional IRA contribution regardless of income.

You can make a ROTH IRA contribution regardless of whether you or your spouse is covered by a retirement plan as long as your modified AGI is less than $178k. The ability to contribute to a ROTH is phased out between $178k and $188k.

Since I understand that your gross income is $150k you should not have any trouble with the modified AGI limits this year. If your income increases be sure you speak with your tax preparer to learn if are above the limit. Modified AGI is a little complicated but it is basically AGI plus deductions for your IRA, student loan deduction, foreign income, etc. etc.

Hope this helps.

Comment   |  Flag   |  Dec 27, 2013 from Woodbridge, VA

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