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Q: Deductability of an IRA ( Answered 4 out of 5 stars,   0 Comments )
Subject: Deductability of an IRA
Category: Business and Money > Finance
Asked by: elammer-ga
List Price: $10.00
Posted: 17 Feb 2003 17:23 PST
Expires: 19 Mar 2003 17:23 PST
Question ID: 162754
I have a 401k of which I put the maximum each year. I have a RothIRA,
of which I max out as well. My wife has a traditional IRA. My question
is this, is there any deductability with the traditional IRA? We file
married, head of household.

Thanks in advance.
Subject: Re: Deductability of an IRA
Answered By: hailstorm-ga on 17 Feb 2003 18:00 PST
Rated:4 out of 5 stars

The traditional vs Roth IRA debate is not an uncommon one.  Both offer
great benefits in saving for retirement, but in completely different

In a traditional IRA, the contributions you make can be deducted in
the tax year in which you make your contribution, provided that your
combined modified adjusted gross income is below the limit set by the
IRS.  You also need to file your taxes jointly, as the modified AGI
range for married filing separate filers is $0 to $10,000, an income
level you both most likely exceed.

You didn't mention whether your wife was also working and contributing
to a qualified retirement plan, but the limit you will fall under will
depend on this.  If your wife does _not_ contribute to a retirement
plan, you can deduct the full contribution to her traditional IRA if
your combined modified AGI is $150,000 or under, and make a partial
deduction for modified AGI up to $160,000.  If your wife _does_
contribute to a retirement plan, the full contribution deduction drops
to a modified AGI of $54,000, and a partial deduction extends only up
to $64,000.  But remember that with a traditional IRA, while your
contribution is deductable, any income those IRA investments earn is
fully taxable as capital gains.

A Roth IRA is much simpler.  None of the contributions made to a Roth
IRA can be deducted from your taxes.  However, any income that your
Roth IRA investments earn is completely tax free, provided that you do
not withdraw them before age 59 1/2.

For a full discussion on IRAs, including all 11 types of IRA,
information on converting IRAs, and how to determine which type of IRA
is right for you, please see the Motley Fool's IRA informational site

Sites Cited:
    Motley Fool

Google Search Terms Used:
    IRA motley fool

Request for Answer Clarification by elammer-ga on 17 Feb 2003 22:47 PST
This is a very helpful start, but I'm still not sure I've got an
answer. My wife stays at home and does not contribute to a retirement
plan (I do)
This is how our 2003 will look

12,000 401k
3000 Roth IRA
3000 Traditional IRA

Come next year when we file, will that $3000 be deductable?  My AGI
will be approx. $120k.


Clarification of Answer by hailstorm-ga on 18 Feb 2003 00:11 PST

I apologize that I missed that you mentioned that you would be filing
"head of household"  In that case, the range for deductions range for
a full deduction on $95,000 of income, to partial deductions down to
$110,000.  So you would *not* be eligible to deduct this contribution
from your taxes.  In addition, your $120k earnings are also more than
the limit that can be earned by someone filing head of household to
contribute to a Roth IRA, so your Roth IRA contribution is invalid as

If you were to file a joint return, the full deduction value limit
would increase to $150,000, you could deduct the full $3,000 of your
wife's traditional IRA, and you would also qualify to make the full
$3,000 contribution to your Roth IRA.

Unfortunately, at your income level you are also at risk of coming
under the umbrella of the Alternative Minimum Tax, a kind of parallel
tax that penalizes high income earners.  Determining whether you would
be affected by the AMT would require an extensive analysis of your
financial situation the likes of which we probably cannot do through
the Google Answers interface.  You can learn more about the AMT from
the IRS site at,,id%3D10555,00.html
elammer-ga rated this answer:4 out of 5 stars
Would definitely recommend the person that provided answer to my tax question.

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