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IRS.gov Website
Publication 590
taxmap/pubs/p590-006.htm#en_us_publink1000230433

How Much Can You Deduct?(p12)

rule
Generally, you can deduct the lesser of: However, if you or your spouse was covered by an employer retirement plan, you may not be able to deduct this amount. See Limit if Covered by Employer Plan, later.
Deposit
You may be able to claim a credit for contributions to your traditional IRA. For more information, see chapter 4.
taxmap/pubs/p590-006.htm#en_us_publink1000230440

Trustees' fees.(p12)

rule
Trustees' administrative fees that are billed separately and paid in connection with your traditional IRA are not deductible as IRA contributions. However, they may be deductible as a miscellaneous itemized deduction on Schedule A (Form 1040). For information about miscellaneous itemized deductions, see Publication 529, Miscellaneous Deductions.
taxmap/pubs/p590-006.htm#en_us_publink1000230441

Brokers' commissions.(p12)

rule
These commissions are part of your IRA contribution and, as such, are deductible subject to the limits.
taxmap/pubs/p590-006.htm#en_us_publink1000230442

Full deduction.(p12)

rule
If neither you nor your spouse was covered for any part of the year by an employer retirement plan, you can take a deduction for total contributions to one or more of your traditional IRAs of up to the lesser of:
This limit is reduced by any contributions made to a 501(c)(18) plan on your behalf.
taxmap/pubs/p590-006.htm#en_us_publink1000230444
Kay Bailey Hutchison Spousal IRA.(p12)
In the case of a married couple with unequal compensation who file a joint return, the deduction for contributions to the traditional IRA of the spouse with less compensation is limited to the lesser of:
  1. $5,500 ($6,500 if the spouse with the lower compensation is age 50 or older), or
  2. The total compensation includible in the gross income of both spouses for the year reduced by the following three amounts.
    1. The IRA deduction for the year of the spouse with the greater compensation.
    2. Any designated nondeductible contribution for the year made on behalf of the spouse with the greater compensation.
    3. Any contributions for the year to a Roth IRA on behalf of the spouse with the greater compensation.
This limit is reduced by any contributions to a section 501(c)(18) plan on behalf of the spouse with the lesser compensation.
Note.If you were divorced or legally separated (and did not remarry) before the end of the year, you cannot deduct any contributions to your spouse's IRA. After a divorce or legal separation, you can deduct only the contributions to your own IRA. Your deductions are subject to the rules for single individuals.
taxmap/pubs/p590-006.htm#en_us_publink1000230447

Covered by an employer retirement plan.(p13)

rule
If you or your spouse was covered by an employer retirement plan at any time during the year for which contributions were made, your deduction may be further limited. This is discussed later under Limit if Covered by Employer Plan. Limits on the amount you can deduct do not affect the amount that can be contributed.
taxmap/pubs/p590-006.htm#en_us_publink1000230449

Are You Covered
by an Employer Plan?(p13)

rule
The Form W-2 you receive from your employer has a box used to indicate whether you were covered for the year. The "Retirement Plan" box should be checked if you were covered.
Reservists and volunteer firefighters should also see Situations in Which You Are Not Covered, later.
If you are not certain whether you were covered by your employer's retirement plan, you should ask your employer.
taxmap/pubs/p590-006.htm#en_us_publink1000230451

Federal judges.(p13)

rule
For purposes of the IRA deduction, federal judges are covered by an employer plan.
taxmap/pubs/p590-006.htm#en_us_publink1000230452

For Which Year(s) Are You Covered?(p13)

rule
Special rules apply to determine the tax years for which you are covered by an employer plan. These rules differ depending on whether the plan is a defined contribution plan or a defined benefit plan.
taxmap/pubs/p590-006.htm#en_us_publink1000230453

Tax year.(p13)

rule
Your tax year is the annual accounting period you use to keep records and report income and expenses on your income tax return. For almost all people, the tax year is the calendar year.
taxmap/pubs/p590-006.htm#en_us_publink1000230454

Defined contribution plan.(p13)

rule
Generally, you are covered by a defined contribution plan for a tax year if amounts are contributed or allocated to your account for the plan year that ends with or within that tax year. However, also see Situations in Which You Are Not Covered, later.
A defined contribution plan is a plan that provides for a separate account for each person covered by the plan. In a defined contribution plan, the amount to be contributed to each participant's account is spelled out in the plan. The level of benefits actually provided to a participant depends on the total amount contributed to that participant's account and any earnings and losses on those contributions. Types of defined contribution plans include profit-sharing plans, stock bonus plans, and money purchase pension plans.
taxmap/pubs/p590-006.htm#en_us_publink1000230456

Example.(p13)

Company A has a money purchase pension plan. Its plan year is from July 1 to June 30. The plan provides that contributions must be allocated as of June 30. Bob, an employee, leaves Company A on December 31, 2012. The contribution for the plan year ending on June 30, 2013, is made February 15, 2014. Because an amount is contributed to Bob's account for the plan year, Bob is covered by the plan for his 2013 tax year.
A special rule applies to certain plans in which it is not possible to determine if an amount will be contributed to your account for a given plan year. If, for a plan year, no amounts have been allocated to your account that are attributable to employer contributions, employee contributions, or forfeitures, by the last day of the plan year, and contributions are discretionary for the plan year, you are not covered for the tax year in which the plan year ends. If, after the plan year ends, the employer makes a contribution for that plan year, you are covered for the tax year in which the contribution is made.
taxmap/pubs/p590-006.htm#en_us_publink1000230457

Example.(p13)

Mickey was covered by a profit-sharing plan and left the company on December 31, 2012. The plan year runs from July 1 to June 30. Under the terms of the plan, employer contributions do not have to be made, but if they are made, they are contributed to the plan before the due date for filing the company's tax return. Such contributions are allocated as of the last day of the plan year, and allocations are made to the accounts of individuals who have any service during the plan year. As of June 30, 2013, no contributions were made that were allocated to the June 30, 2013, plan year, and no forfeitures had been allocated within the plan year. In addition, as of that date, the company was not obligated to make a contribution for such plan year and it was impossible to determine whether or not a contribution would be made for the plan year. On December 31, 2013, the company decided to contribute to the plan for the plan year ending June 30, 2013. That contribution was made on February 15, 2014. Mickey is an active participant in the plan for his 2014 tax year but not for his 2013 tax year.
taxmap/pubs/p590-006.htm#en_us_publink1000230458
No vested interest.(p13)
If an amount is allocated to your account for a plan year, you are covered by that plan even if you have no vested interest in (legal right to) the account.
taxmap/pubs/p590-006.htm#en_us_publink1000230459

Defined benefit plan.(p13)

rule
If you are eligible to participate in your employer's defined benefit plan for the plan year that ends within your tax year, you are covered by the plan. This rule applies even if you:
A defined benefit plan is any plan that is not a defined contribution plan. In a defined benefit plan, the level of benefits to be provided to each participant is spelled out in the plan. The plan administrator figures the amount needed to provide those benefits and those amounts are contributed to the plan. Defined benefit plans include pension plans and annuity plans.
taxmap/pubs/p590-006.htm#en_us_publink1000230460

Example.(p14)

Nick, an employee of Company B, is eligible to participate in Company B's defined benefit plan, which has a July 1 to June 30 plan year. Nick leaves Company B on December 31, 2012. Because Nick is eligible to participate in the plan for its year ending June 30, 2013, he is covered by the plan for his 2013 tax year.
taxmap/pubs/p590-006.htm#en_us_publink1000230461
No vested interest.(p14)
If you accrue a benefit for a plan year, you are covered by that plan even if you have no vested interest in (legal right to) the accrual.
taxmap/pubs/p590-006.htm#en_us_publink1000230462

Situations in Which You Are Not Covered(p14)

rule
Unless you are covered by another employer plan, you are not covered by an employer plan if you are in one of the situations described below.
taxmap/pubs/p590-006.htm#en_us_publink1000230463

Social security or railroad retirement.(p14)

rule
Coverage under social security or railroad retirement is not coverage under an employer retirement plan.
taxmap/pubs/p590-006.htm#en_us_publink1000230464

Benefits from previous employer's plan.(p14)

rule
If you receive retirement benefits from a previous employer's plan, you are not covered by that plan.
taxmap/pubs/p590-006.htm#en_us_publink1000230465

Reservists.(p14)

rule
If the only reason you participate in a plan is because you are a member of a reserve unit of the Armed Forces, you may not be covered by the plan. You are not covered by the plan if both of the following conditions are met.
  1. The plan you participate in is established for its employees by:
    1. The United States,
    2. A state or political subdivision of a state, or
    3. An instrumentality of either (a) or (b) above.
  2. You did not serve more than 90 days on active duty during the year (not counting duty for training).
taxmap/pubs/p590-006.htm#en_us_publink1000230466

Volunteer firefighters.(p14)

rule
If the only reason you participate in a plan is because you are a volunteer firefighter, you may not be covered by the plan. You are not covered by the plan if both of the following conditions are met.
  1. The plan you participate in is established for its employees by:
    1. The United States,
    2. A state or political subdivision of a state, or
    3. An instrumentality of either (a) or (b) above.
  2. Your accrued retirement benefits at the beginning of the year will not provide more than $1,800 per year at retirement.
taxmap/pubs/p590-006.htm#en_us_publink1000230467

Limit if Covered by Employer Plan(p14)

rule
As discussed earlier, the deduction you can take for contributions made to your traditional IRA depends on whether you or your spouse was covered for any part of the year by an employer retirement plan. Your deduction is also affected by how much income you had and by your filing status. Your deduction may also be affected by social security benefits you received.
taxmap/pubs/p590-006.htm#en_us_publink1000230468

Reduced or no deduction.(p14)

rule
If either you or your spouse was covered by an employer retirement plan, you may be entitled to only a partial (reduced) deduction or no deduction at all, depending on your income and your filing status.
Your deduction begins to decrease (phase out) when your income rises above a certain amount and is eliminated altogether when it reaches a higher amount. These amounts vary depending on your filing status.
To determine if your deduction is subject to the phaseout, you must determine your modified adjusted gross income (AGI) and your filing status, as explained later under Deduction Phaseout. Once you have determined your modified AGI and your filing status, you can use Table 1-2 or Table 1-3 to determine if the phaseout applies.
taxmap/pubs/p590-006.htm#en_us_publink1000230470

Social Security Recipients(p14)

rule
Instead of using Table 1-2 or Table 1-3 and Worksheet 1-2, Figuring Your Reduced IRA Deduction for 2013, later, complete the worksheets in Appendix B of this publication if, for the year, all of the following apply. Use the worksheets in Appendix B to figure your IRA deduction, your nondeductible contribution, and the taxable portion, if any, of your social security benefits. Appendix B includes an example with filled-in worksheets to assist you.
taxmap/pubs/p590-006.htm#en_us_publink1000230472

Table 1-2. Effect of Modified AGI1 on Deduction if You Are Covered by a Retirement Plan at Work

If you are covered by a retirement plan at work, use this table to determine if your modified AGI affects the amount of your deduction.

IF your filing
status is ...
AND your modified adjusted gross income (modified AGI)
is ...
THEN you can take ...
single or
head of household
$59,000 or lessa full deduction.
more than $59,000
but less than $69,000
a partial deduction.
$69,000 or moreno deduction.
married filing jointly or
qualifying widow(er)
$95,000 or lessa full deduction.
more than $95,000
but less than $115,000
a partial deduction.
$115,000 or moreno deduction.
married filing separately2less than $10,000a partial deduction.
$10,000 or moreno deduction.
1 Modified AGI (adjusted gross income). See Modified adjusted gross income (AGI), later.
2 If you did not live with your spouse at any time during the year, your filing status is considered Single for this purpose (therefore, your IRA deduction is determined under the "Single" filing status).
taxmap/pubs/p590-006.htm#en_us_publink1000230476

Table 1-3. Effect of Modified AGI1 on Deduction if You Are NOT Covered by a Retirement Plan at Work

If you are not covered by a retirement plan at work, use this table to determine if your modified AGI affects the amount of your deduction.

IF your filing
status is ...
AND your modified adjusted gross income (modified AGI) is ... THEN you can take ...
single,
head of household, or
qualifying widow(er)
any amounta full deduction.
married filing jointly or separately with a spouse who is not covered by a plan
at work
any amounta full deduction.
married filing jointly with a spouse who is covered by a plan
at work
$178,000 or lessa full deduction.
more than $178,000
but less than $188,000
a partial deduction.
$188,000 or moreno deduction.
married filing separately with a spouse who is covered by a plan
at work2
less than $10,000a partial deduction.
$10,000 or moreno deduction.
1 Modified AGI (adjusted gross income). See Modified adjusted gross income (AGI), later.
2 You are entitled to the full deduction if you did not live with your spouse at any time during the year.
Deposit
For 2014, if you are not covered by a retirement plan at work and you are married filing jointly with a spouse who is covered by a plan at work, your deduction is phased out if your modified AGI is more than $181,000 but less than $191,000. If your AGI is $191,000 or more, you cannot take a deduction for a contribution to a traditional IRA.
taxmap/pubs/p590-006.htm#en_us_publink1000230481

Deduction Phaseout(p14)

rule
The amount of any reduction in the limit on your IRA deduction (phaseout) depends on whether you or your spouse was covered by an employer retirement plan.
taxmap/pubs/p590-006.htm#en_us_publink1000230482

Covered by a retirement plan.(p14)

rule
If you are covered by an employer retirement plan and you did not receive any social security retirement benefits, your IRA deduction may be reduced or eliminated depending on your filing status and modified AGI, as shown in Table 1-2.
Deposit
For 2014, if you are covered by a retirement plan at work, your IRA deduction will not be reduced (phased out) unless your modified AGI is:
  • More than $60,000 but less than $70,000 for a single individual (or head of household),
  • More than $96,000 but less than $116,000 for a married couple filing a joint return (or a qualifying widow(er)), or
  • Less than $10,000 for a married individual filing a separate return.
taxmap/pubs/p590-006.htm#en_us_publink1000230485

If your spouse is covered.(p15)

rule
If you are not covered by an employer retirement plan, but your spouse is, and you did not receive any social security benefits, your IRA deduction may be reduced or eliminated entirely depending on your filing status and modified AGI as shown in Table 1-3.
taxmap/pubs/p590-006.htm#en_us_publink1000230487

Filing status.(p16)

rule
Your filing status depends primarily on your marital status. For this purpose, you need to know if your filing status is single or head of household, married filing jointly or qualifying widow(er), or married filing separately. If you need more information on filing status, see Publication 501, Exemptions, Standard Deduction, and Filing Information.
taxmap/pubs/p590-006.htm#en_us_publink1000230488
Lived apart from spouse.(p16)
If you did not live with your spouse at any time during the year and you file a separate return, your filing status, for this purpose, is single.
taxmap/pubs/p590-006.htm#en_us_publink1000230489

Modified adjusted gross income (AGI).(p16)

rule
You can use Worksheet 1-1 to figure your modified AGI. If you made contributions to your IRA for 2013 and received a distribution from your IRA in 2013, see Both contributions for 2013 and distributions in 2013, later.
EIC
Do not assume that your modified AGI is the same as your compensation. Your modified AGI may include income in addition to your compensation (discussed earlier) such as interest, dividends, and income from IRA distributions.
taxmap/pubs/p590-006.htm#en_us_publink1000230492
Form 1040.(p16)
If you file Form 1040, refigure the amount on the page 1 "adjusted gross income" line without taking into account any of the following amounts. This is your modified AGI.
taxmap/pubs/p590-006.htm#en_us_publink1000230493
Form 1040A.(p16)
If you file Form 1040A, refigure the amount on the page 1 "adjusted gross income" line without taking into account any of the following amounts.This is your modified AGI.
taxmap/pubs/p590-006.htm#en_us_publink1000230494
Form 1040NR.(p16)
If you file Form 1040NR, refigure the amount on the page 1 "adjusted gross income" line without taking into account any of the following amounts.This is your modified AGI.
taxmap/pubs/p590-006.htm#en_us_publink1000230495
Income from IRA distributions.(p16)
If you received distributions in 2013 from one or more traditional IRAs and your traditional IRAs include only deductible contributions, the distributions are fully taxable and are included in your modified AGI.
taxmap/pubs/p590-006.htm#en_us_publink1000230496
Both contributions for 2013 and distributions in 2013.(p16)
If all three of the following apply, any IRA distributions you received in 2013 may be partly tax free and partly taxable. If this is your situation, you must figure the taxable part of the traditional IRA distribution before you can figure your modified AGI. To do this, you can use Worksheet 1-5, later.
If at least one of the above does not apply, figure your modified AGI using Worksheet 1-1, later.
taxmap/pubs/p590-006.htm#en_us_publink1000230500

How To Figure Your Reduced IRA Deduction(p16)

rule
If you or your spouse is covered by an employer retirement plan and you did not receive any social security benefits, you can figure your reduced IRA deduction by using Worksheet 1-2. Figuring Your Reduced IRA Deduction for 2013. The Instructions for Form 1040, Form 1040A, and Form 1040NR include similar worksheets that you can use instead of the worksheet in this publication.
If you or your spouse is covered by an employer retirement plan, and you received any social security benefits, see Social Security Recipients, earlier.
Note.If you were married and both you and your spouse contributed to IRAs, figure your deduction and your spouse's deduction separately.
taxmap/pubs/p590-006.htm#en_us_publink1000230503
Pencil

Worksheet 1-1. Figuring Your Modified AGI

Use this worksheet to figure your modified AGI for traditional IRA purposes.

1.Enter your adjusted gross income (AGI) from Form 1040, line 38; Form 1040A, line 22; or Form 1040NR, line 37, figured without taking into account the amount from Form 1040, line 32; Form 1040A, line 17; or Form 1040NR, line 32 1.
2.Enter any student loan interest deduction from Form 1040, line 33; Form 1040A, line 18; or Form 1040NR, line 33 2.
3.Enter any tuition and fees deduction from Form 1040, line 34, or Form 1040A, line 193.
4.Enter any domestic production activities deduction from Form 1040, line 35, or Form 1040NR, line 344.
5.Enter any foreign earned income exclusion and/or housing exclusion from Form 2555, line 45, or Form 2555-EZ, line 18 5.
6.Enter any foreign housing deduction from Form 2555, line 50 6.
7.Enter any excludable savings bond interest from Form 8815, line 14 7.
8.Enter any excluded employer-provided adoption benefits from Form 8839, line 28 8.
9.Add lines 1 through 8. This is your Modified AGI for traditional IRA purposes 9.
taxmap/pubs/p590-006.htm#en_us_publink1000230505

Reporting Deductible Contributions(p17)

rule
If you file Form 1040, enter your IRA deduction on line 32 of that form. If you file Form 1040A, enter your IRA deduction on line 17 of that form. If you file Form 1040NR, enter your IRA deduction on line 32 of that form. You cannot deduct IRA contributions on Form 1040EZ or Form 1040NR-EZ.
taxmap/pubs/p590-006.htm#en_us_publink1000230506

Self-employed.(p17)

rule
If you are self-employed (a sole proprietor or partner) and have a SIMPLE IRA, enter your deduction for allowable plan contributions on Form 1040, line 28. If you file Form 1040NR, enter your deduction on line 28 of that form.
taxmap/pubs/p590-006.htm#en_us_publink1000230507

Nondeductible Contributions(p17)

rule
Although your deduction for IRA contributions may be reduced or eliminated, contributions can be made to your IRA of up to the general limit or, if it applies, the Kay Bailey Hutchison Spousal IRA limit. The difference between your total permitted contributions and your IRA deduction, if any, is your nondeductible contribution.
taxmap/pubs/p590-006.htm#en_us_publink1000230510

Example.(p17)

Tony is 29 years old and single. In 2013, he was covered by a retirement plan at work. His salary is $62,000. His modified AGI is $70,000. Tony makes a $5,500 IRA contribution for 2013. Because he was covered by a retirement plan and his modified AGI is above $69,000, he cannot deduct his $5,500 IRA contribution. He must designate this contribution as a nondeductible contribution by reporting it on Form 8606.
taxmap/pubs/p590-006.htm#en_us_publink1000230511

Repayment of reservist distributions.(p17)

rule
Nondeductible contributions may include repayments of qualified reservist distributions. For more information, see Qualified reservist repayments under How Much Can Be Contributed, earlier.
taxmap/pubs/p590-006.htm#en_us_publink1000230514

Form 8606.(p17)

rule
To designate contributions as nondeductible, you must file Form 8606. (See the filled-in Forms 8606 in this chapter.)
You do not have to designate a contribution as nondeductible until you file your tax return. When you file, you can even designate otherwise deductible contributions as nondeductible contributions.
You must file Form 8606 to report nondeductible contributions even if you do not have to file a tax return for the year.
EIC
A Form 8606 is not used for the year that you make a rollover from a qualified retirement plan to a traditional IRA and the rollover includes nontaxable amounts. In those situations, a Form 8606 is completed for the year you take a distribution from that IRA. See Form 8606 under Distributions Fully or Partly Taxable, later.
taxmap/pubs/p590-006.htm#en_us_publink1000230517

Failure to report nondeductible contributions.(p17)

rule
If you do not report nondeductible contributions, all of the contributions to your traditional IRA will be treated like deductible contributions when withdrawn. All distributions from your IRA will be taxed unless you can show, with satisfactory evidence, that nondeductible contributions were made.
taxmap/pubs/p590-006.htm#en_us_publink1000230518

Penalty for overstatement.(p17)

rule
If you overstate the amount of nondeductible contributions on your Form 8606 for any tax year, you must pay a penalty of $100 for each overstatement, unless it was due to reasonable cause.
taxmap/pubs/p590-006.htm#en_us_publink1000230519

Penalty for failure to file Form 8606.(p17)

rule
You will have to pay a $50 penalty if you do not file a required Form 8606, unless you can prove that the failure was due to reasonable cause.
taxmap/pubs/p590-006.htm#en_us_publink1000230520

Tax on earnings on nondeductible contributions.(p17)

rule
As long as contributions are within the contribution limits, none of the earnings or gains on contributions (deductible or nondeductible) will be taxed until they are distributed.
taxmap/pubs/p590-006.htm#en_us_publink1000230521

Cost basis.(p18)

rule
You will have a cost basis in your traditional IRA if you made any nondeductible contributions. Your cost basis is the sum of the nondeductible contributions to your IRA minus any withdrawals or distributions of nondeductible contributions.
EIC
Commonly, distributions from your traditional IRAs will include both taxable and nontaxable (cost basis) amounts. See Are Distributions Taxable, later, for more information.
Where Refund
Recordkeeping. There is a recordkeeping worksheet, Appendix A. Summary Record of Traditional IRA(s) for 2013, that you can use to keep a record of deductible and nondeductible IRA contributions.
taxmap/pubs/p590-006.htm#en_us_publink1000230526

Examples — Worksheet for
Reduced IRA Deduction for 2013(p18)

rule
The following examples illustrate the use of Worksheet 1-2, Figuring Your Reduced IRA Deduction for 2013.
taxmap/pubs/p590-006.htm#en_us_publink1000230527

Example 1.(p18)

For 2013, Tom and Betty file a joint return on Form 1040. They are both 39 years old. They are both employed and Tom is covered by his employer's retirement plan. Tom's salary is $59,000 and Betty's is $32,555. They each have a traditional IRA and their combined modified AGI, which includes $5,000 interest and dividend income, is $96,555. Because their modified AGI is between $95,000 and $115,000 and Tom is covered by an employer plan, Tom is subject to the deduction phaseout discussed earlier under Limit if Covered by Employer Plan.
For 2013, Tom contributed $5,500 to his IRA and Betty contributed $5,500 to hers. Even though they file a joint return, they must use separate worksheets to figure the IRA deduction for each of them.
Tom can take a deduction of only $5,080.
He can choose to treat the $5,080 as either deductible or nondeductible contributions. He can either leave the $420 ($5,500 − $5,080) of nondeductible contributions in his IRA or withdraw them by April 15, 2014. He decides to treat the $5,080 as deductible contributions and leave the $420 of nondeductible contributions in his IRA.
Using Worksheet 1-2, Figuring Your Reduced IRA Deduction for 2013, Tom figures his deductible and nondeductible amounts as shown on Worksheet 1-2. Figuring Your Reduced IRA Deduction for 2013—Example 1 Illustrated.
Betty figures her IRA deduction as follows. Betty can treat all or part of her contributions as either deductible or nondeductible. This is because her $5,500 contribution for 2013 is not subject to the deduction phaseout discussed earlier under Limit if Covered by Employer Plan. She does not need to use Worksheet 1-2, Figuring Your Reduced IRA Deduction for 2013, because their modified AGI is not within the phaseout range that applies. Betty decides to treat her $5,500 IRA contributions as deductible.
The IRA deductions of $5,080 and $5,500 on the joint return for Tom and Betty total $10,580.
taxmap/pubs/p590-006.htm#en_us_publink1000230531

Example 2.(p18)

For 2013, Ed and Sue file a joint return on Form 1040. They are both 39 years old. Ed is covered by his employer's retirement plan. Ed's salary is $45,000. Sue had no compensation for the year and did not contribute to an IRA. Sue is not covered by an employer plan. Ed contributed $5,500 to his traditional IRA and $5,500 to a traditional IRA for Sue (a Kay Bailey Hutchison Spousal IRA). Their combined modified AGI, which includes $2,000 interest and dividend income and a large capital gain from the sale of stock, is $180,555.
Because the combined modified AGI is $115,000 or more, Ed cannot deduct any of the contribution to his traditional IRA. He can either leave the $5,500 of nondeductible contributions in his IRA or withdraw them by April 15, 2014.
Sue figures her IRA deduction as shown on Worksheet 1-2. Figuring Your Reduced IRA Deduction for 2013—Example 2 Illustrated.
taxmap/pubs/p590-006.htm#en_us_publink1000230533
Pencil

Worksheet 1-2. Figuring Your Reduced IRA Deduction for 2013

(Use only if you or your spouse is covered by an employer plan and your modified AGI falls between the two amounts shown below for your coverage situation and filing status.)

Note. If you were married and both you and your spouse contributed to IRAs, figure your deduction and your spouse's deduction separately.

IF you ... AND your
filing status is ...
AND your
modified AGI
is over ...
THEN enter on
line 1 below ...
   
are covered by an employer plan single or head of household$59,000$69,000  
married filing jointly or qualifying widow(er)$95,000$115,000  
married filing separately$0$10,000  
are not covered by an employer plan, but your spouse is covered married filing jointly$178,000$188,000  
married filing separately$0$10,000  
1.Enter applicable amount from table above1.
2.Enter your modified AGI (that of both spouses, if married filing jointly) 2.
 Note. If line 2 is equal to or more than the amount on line 1, stop here.
Your IRA contributions are not deductible. See Nondeductible Contributions, earlier.
  
3.Subtract line 2 from line 1. If line 3 is $10,000 or more ($20,000 or more if married filing jointly or qualifying widow(er) and you are covered by an employer plan), stop here. You can take a full IRA deduction for contributions of up to $5,500 ($6,500 if you are age 50 or older) or 100% of your (and if married filing jointly, your spouse's) compensation, whichever is less 3.
4.Multiply line 3 by the percentage below that applies to you. If the result is not a multiple of $10, round it to the next highest multiple of $10. (For example, $611.40 is rounded to $620.) However, if the result is less than $200, enter $200.    
 
  • Married filing jointly or qualifying widow(er) and you are covered by an employer plan, multiply line 3 by 27.5% (.275) (by 32.5% (.325) if you are age 50 or older).
  • All others, multiply line 3 by 55% (.55) (by 65% (.65) if you are age 50 or older).
Right brace4.
5.Enter your compensation minus any deductions on Form 1040 or Form 1040NR, line 27 (deductible part of self-employment tax) and line 28 (self-employed SEP, SIMPLE, and qualified plans). If you are filing a joint return and your compensation is less than your spouse's, include your spouse's compensation reduced by his or her traditional IRA and Roth IRA contributions for this year. If you file Form 1040 or Form 1040NR, do not reduce your compensation by any losses from self-employment 5.
6.Enter contributions made, or to be made, to your IRA for 2013, but do not enter more than $5,500 ($6,500 if you are age 50 or older). If contributions are more than $5,500 ($6,500 if you are age 50 or older), see Excess Contributions, later. 6.
7.IRA deduction. Compare lines 4, 5, and 6. Enter the smallest amount (or a smaller amount if you choose) here and on the Form 1040, 1040A, or 1040NR line for your IRA, whichever applies. If line 6 is more than line 7 and you want to make a nondeductible contribution, go to line 8 7.
8.Nondeductible contribution. Subtract line 7 from line 5 or 6, whichever is smaller.
Enter the result here and on line 1 of your Form 8606
8.
taxmap/pubs/p590-006.htm#en_us_publink1000230549

Worksheet 1-2. Figuring Your Reduced IRA Deduction for 2013—Example 1 Illustrated

(Use only if you or your spouse is covered by an employer plan and your modified AGI falls between the two amounts shown below for your coverage situation and filing status.)

Note. If you were married and both you and your spouse contributed to IRAs, figure your deduction and your spouse's deduction separately.

IF you ... AND your
filing status is ...
AND your
modified AGI
is over ...
THEN enter on
line 1 below ...
   
are covered by an employer plan single or head of household$59,000$69,000  
married filing jointly or qualifying widow(er)$95,000$115,000  
married filing separately$0$10,000  
are not covered by an employer plan, but your spouse is covered married filing jointly$178,000$188,000  
married filing separately$0$10,000  
1.Enter applicable amount from table above1.115,000
2.Enter your modified AGI (that of both spouses, if married filing jointly) 2.96,555
 Note. If line 2 is equal to or more than the amount on line 1, stop here.
Your IRA contributions are not deductible. See Nondeductible Contributions, earlier.
  
3.Subtract line 2 from line 1. If line 3 is $10,000 or more ($20,000 or more if married filing jointly or qualifying widow(er) and you are covered by an employer plan), stop here. You can take a full IRA deduction for contributions of up to $5,500 ($6,500 if you are age 50 or older) or 100% of your (and if married filing jointly, your spouse's) compensation, whichever is less 3.18,445
4.Multiply line 3 by the percentage below that applies to you. If the result is not a multiple of $10, round it to the next highest multiple of $10. (For example, $611.40 is rounded to $620.) However, if the result is less than $200, enter $200.    
 
  • Married filing jointly or qualifying widow(er) and you are covered by an employer plan, multiply line 3 by 27.5% (.275) (by 32.5% (.325) if you are age 50 or older).
  • All others, multiply line 3 by 55% (.55) (by 65% (.65) if you are age 50 or older).
Right brace4.5,080
5.Enter your compensation minus any deductions on Form 1040 or Form 1040NR, line 27 (deductible part of self-employment tax) and line 28 (self-employed SEP, SIMPLE, and qualified plans). If you are filing a joint return and your compensation is less than your spouse's, include your spouse's compensation reduced by his or her traditional IRA and Roth IRA contributions for this year. If you file Form 1040 or Form 1040NR, do not reduce your compensation by any losses from self-employment 5.59,000
6.Enter contributions made, or to be made, to your IRA for 2013, but do not enter more than $5,500 ($6,500 if you are age 50 or older). If contributions are more than $5,500 ($6,500 if you are age 50 or older), see Excess Contributions, later. 6.5,500
7.IRA deduction. Compare lines 4, 5, and 6. Enter the smallest amount (or a smaller amount if you choose) here and on the Form 1040, 1040A, or 1040NR line for your IRA, whichever applies. If line 6 is more than line 7 and you want to make a nondeductible contribution, go to line 8 7.5,080
8.Nondeductible contribution. Subtract line 7 from line 5 or 6, whichever is smaller.
Enter the result here and on line 1 of your Form 8606
8.420
taxmap/pubs/p590-006.htm#en_us_publink1000230554

Worksheet 1-2. Figuring Your Reduced IRA Deduction for 2013—Example 2 Illustrated

(Use only if you or your spouse is covered by an employer plan and your modified AGI falls between the two amounts shown below for your coverage situation and filing status.)

Note. If you were married and both you and your spouse contributed to IRAs, figure your deduction and your spouse's deduction separately.

IF you ... AND your
filing status is ...
AND your
modified AGI
is over ...
THEN enter on
line 1 below ...
   
are covered by an employer plan single or head of household$59,000$69,000  
married filing jointly or qualifying widow(er)$95,000$115,000  
married filing separately$0$10,000  
are not covered by an employer plan, but your spouse is covered married filing jointly$178,000$188,000  
married filing separately$0$10,000  
1.Enter applicable amount from table above1.188,000
2.Enter your modified AGI (that of both spouses, if married filing jointly) 2.180,555
 Note. If line 2 is equal to or more than the amount on line 1, stop here.
Your IRA contributions are not deductible. See Nondeductible Contributions, earlier.
  
3.Subtract line 2 from line 1. If line 3 is $10,000 or more ($20,000 or more if married filing jointly or qualifying widow(er) and you are covered by an employer plan), stop here. You can take a full IRA deduction for contributions of up to $5,500 ($6,500 if you are age 50 or older) or 100% of your (and if married filing jointly, your spouse's) compensation, whichever is less 3.7,445
4.Multiply line 3 by the percentage below that applies to you. If the result is not a multiple of $10, round it to the next highest multiple of $10. (For example, $611.40 is rounded to $620.) However, if the result is less than $200, enter $200.    
 
  • Married filing jointly or qualifying widow(er) and you are covered by an employer plan, multiply line 3 by 27.5% (.275) (by 32.5% (.325) if you are age 50 or older).
  • All others, multiply line 3 by 55% (.55) (by 65% (.65) if you are age 50 or older).
Right brace4.4,100
5.Enter your compensation minus any deductions on Form 1040 or Form 1040NR, line 27 (deductible part of self-employment tax) and line 28 (self-employed SEP, SIMPLE, and qualified plans). If you are filing a joint return and your compensation is less than your spouse's, include your spouse's compensation reduced by his or her traditional IRA and Roth IRA contributions for this year. If you file Form 1040 or Form 1040NR, do not reduce your compensation by any losses from self-employment 5.39,500
6.Enter contributions made, or to be made, to your IRA for 2013, but do not enter more than $5,500 ($6,500 if you are age 50 or older). If contributions are more than $5,500 ($6,500 if you are age 50 or older), see Excess Contributions, later. 6.5,500
7.IRA deduction. Compare lines 4, 5, and 6. Enter the smallest amount (or a smaller amount if you choose) here and on the Form 1040, 1040A, or 1040NR line for your IRA, whichever applies. If line 6 is more than line 7 and you want to make a nondeductible contribution, go to line 8 7.4,100
8.Nondeductible contribution. Subtract line 7 from line 5 or 6, whichever is smaller.
Enter the result here and on line 1 of your Form 8606
8.1,400