I’m married and we file jointly. Our combined income is over 200k USD. My wife does not work. Can both my wife and I have a traditional IRA, each contributing 4k (maximum allowed for 2007)? Can we reduce our taxable income by the total amount we contribute each year to the IRA, or just a partial amount (due to our high income)? If there is only partial relief, can someone point me to a good website that will help me calculate the relief we can expect?
Thanks!
Mathew
March 21, 2010 at 11:58 am
You should only be affected by the phase-out provisions if either of you are an active participant in an employee retirement plan. If that is the case you will be phased out completely at 200K.
Try this web site for more information.
http://www.irs.gov/publications/p590/index.html
ninasgramma
March 21, 2010 at 12:46 pm
If you have a retirement plan at work, such as a 401k, then neither of you are eligible to take a tax deduction on a contribution to a traditional IRA.
If you do not have a retirement plan at work, then you can both contribute $4,000 to a traditional IRA and take a full tax deduction.
Because of your income, there is no phase-out on the deduction for contributing to a traditional IRA.
You also make too much money to contribute to a Roth IRA. But what you can do, assuming you have earned income, is establish and contribute to traditional IRAs for which you do not get a tax deduction. Then in 2010 you will be able to convert the IRAs into a Roth IRAs and pay income taxes only on the gains in the accounts. The income limits for this conversion disappear in 2010.
A full and quite readable discussion of IRAs appears here
http://www.irs.gov/pub/irs-pdf/p590.pdf