No Retirement Plan at Work: Income limits for Deduct IRA?

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Topic Author
Chicago60
Posts: 516
Joined: Tue Jan 29, 2013 2:40 pm

No Retirement Plan at Work: Income limits for Deduct IRA?

Post by Chicago60 »

For the first time in years, I have no retirement plan at work. In prior years, I contributed to an IRA and backdoored ROTH for spouse and for me. My question is what are the income limits, if any, for a deductible IRA if I have no retirement plan at work, and spouse does not work? The Wiki seems to suggest there ARE income limits http://www.bogleheads.org/wiki/Traditional_IRA but this IRS site suggests there are not. http://www.irs.gov/Retirement-Plans/IRA ... ion-Limits

Am I misreading the Wiki?
sscritic
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Joined: Thu Sep 06, 2007 8:36 am

Re: No Retirement Plan at Work: Income limits for Deduct IRA

Post by sscritic »

I am not sure, but I think the wiki is misleading. For a married couple, there are four possible combinations: both not covered by employee plan, you are and spouse isn't, you aren't and spouse is, both are not.

The IRS splits this into two [links to 2013 pages, not 2014 pages]:
You are not covered, then your spouse is or isn't. That's one web page.
http://www.irs.gov/Retirement-Plans/201 ... an-at-Work

You are covered, then your spouse is or isn't. That's another web page.
http://www.irs.gov/Retirement-Plans/201 ... an-at-Work

Note that your spouse is or isn't doesn't matter if you are. Thus there are really only three cases.

The wiki section on limits starts with the limits on the amount, but then says:
If you or your spouse are covered by an employer provided plan through your employer, your deductible IRA contribution may be limited according to the amount of one's modified adjusted gross income, defined as:
Following the MAGI definition, the wiki says:
The following tables show deductible income limits for individuals, based on filing status and whether they are or are not covered by an employer plan:
But these are the tables if you are and if you are not but your spouse is. These are the two cases of at least one of you are covered (see the sentence before the definition of MAGI), so it seems to follow logically.

The case of neither is covered is not covered in the wiki. Perhaps that is because there are no limits in this case, so it doesn't fit in the section on limits. :)

At least that's how I read. [I linked to 2013 pages, not 2014 pages]
Topic Author
Chicago60
Posts: 516
Joined: Tue Jan 29, 2013 2:40 pm

Re: No Retirement Plan at Work: Income limits for Deduct IRA

Post by Chicago60 »

Thanks, sscritic. I read the IRS website the same way and I guess I feel the Wiki is misleading. I will make a deductible IRA for myself this year for the first time in years. Question: my non-working spouse made an IRA contribution earlier this year and promptly converted to backdoor Roth. Can she deduct the IRA contribution and convert to a Roth?
DSInvestor
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Joined: Sat Oct 04, 2008 11:42 am

Re: No Retirement Plan at Work: Income limits for Deduct IRA

Post by DSInvestor »

Were you covered by an employer plan for any part of this year, perhaps at your old job? If yes, you were covered by an employer plan and income limits will apply for the traditional IRA deduction. If you were not covered by an employer plan, full tax deduction is allowed no matter how high your income.

She contributes $5500 tax deductible reduces AGI by $5500. She converts $5500 (fully taxable because IRA is pre-tax) which adds $5500 to AGI.

If you want the tax deduction, do not convert to Roth. Since the conversion for her has already been done,she can consider recharacterization of the conversion to undo it.
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Topic Author
Chicago60
Posts: 516
Joined: Tue Jan 29, 2013 2:40 pm

Re: No Retirement Plan at Work: Income limits for Deduct IRA

Post by Chicago60 »

Thanks, DSInvestor. I think I will make the 6500 contribution and take the deduction and leave my spouse's as is.
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