Can I Deduct My IRA Contributions?
Whether or not you can deduct a 2001 contribution to an Individual
Retirement Account depends on several factors:
- Did you have wages, self-employment income or alimony of at least
$2,000? (Or, if less, the amount you are planning to contribute to the IRA?)
Exception: If filing jointly, you can contribute up to $4000 for you and
your spouse who does not work..
- At the end of the year, were you under the age of 70 1/2? IF #1 and #2
are YES, go on to #3. If either is NO, you cannot make a contribution to an
IRA for the tax year.
- Were you (or your spouse, if married) an active participant in an
employer pension plan for any part of the tax year? IF #3 is NO, you can
deduct your IRA contributions. If #3 is YES, go on to #4.
- Was your Adjusted Gross Income under $33,000 (single or Head of
Household), $53,000 (married filing jointly) or ZERO (married filing
separately)? If YES, you can deduct your IRA contributions. If NO, go on to
- If your Adjusted Gross Income exceeds the limits in #4 by MORE than
$10,000, you cannot deduct your IRA contributions, but may contribute to
your IRA as a non-deductible contribution. If your Adjusted Gross Income
exceeds the limits above, but by LESS than $10,000, a partial deduction
would be allowed - See the Form 1040 instructions for a worksheet.
- Spousal IRA - if the spouse is not covered by a pension plan, under new
rules which took effect in 1998 they are NO LONGER considered covered by a
pension plan as was the old law. NEW - the spouse can contribute up to
$2000 whether regardless of wages. NOTE - this spousal IRA is still
subject to phase outs starting at $150,000 and ending at $160,000.