Re: Can IRA contribution be deductible even with SEP-IRA or 401K?

From: Rich Carreiro <rlcarr@animato.arlington.ma.us>
Subject: Re: Can IRA contribution be deductible even with SEP-IRA or 401K?
Date: Sat, 11 Mar 2000 09:51:52 -0500

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>If you do not participate in an employer sponsored retirment plan, you
>are eligible to contribute to IRAs regardless of your income.

It's more subtle than that.

If you are single and are not covered by a qualified employer plan
then what you say is true -- you can deduct your IRA contribution no
matter how high your income.

However, if you are married filing jointly and are not covered *but
your spouse is*, then you are subject to an AGI phaseout on the ability
to deduct your contribution.  The phaseout starts at $150K of combined
AGI and ends at $160K of combined AGI.

And if you are married filing separately and are not covered *but
your spouse is*, the phaseout runs from $0 to $10K (not a typo) of
your AGI.

>If you do participate in a employer sponsored plan, your eligibility is
>phased out based on your income:
>
>  Traditional IRAs:
>    Single: Phased out between $31K and $41K
>    Married Filing Jointly: Phased out between $51K and $61K
     MFS: Phased out between $0K and $10K (no typo)

Correct.  And keep in mind that even if you cannot deduct some or all
your traditional IRA contribution, you can still make it, though if you
can't deduct it you are far better off making a Roth IRA contribution
instead, assuming you are allowed to (see below).

>  Roth IRAs:
>    Single: Phased out between $95K and $110K
>    Married Filing Jointly: Phased out between $150K and $160K 
     MFS: Phased out between $0K and $10K (no typo)

And note that the Roth rules pertain to your ability to make a
contribution at all (Roth contributions are never deductible)and apply
*whether or not* you are covered by a plan at work.

See IRS Publication 590 for more details.

Rich Carreiro                            rlcarr@animato.arlington.ma.us


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