Question

John (age 52 and single) has earned income of $3,000. He has $33,800 of unearned (capital gain) income. a. If he does not participate in an employer-sponsored plan, what is the maximum deductible IRA contribution John can make in 2014 Deductible IRA contribution b. If he does participate in an employer-sponsored plan, what is the maximum deductible IRA contribution John can make in 2014? Deductible IRA contribution c. If he does not participate in an employer-sponsored plan, what is the maximum deductible IRA contribution John can make in 2014 if he has earned income of $18,600? Deductible IRA contribution

Answer 1

The maximum limit For IRA deduction for year 2014 was $5,500 . There was also a catch up limit of $1,000 for the persons aged 50 years or above. So for John(aged 52) the limit of $6,500 will be applicable. There are two types of IRA - Traditional and Roth.

For claiming maximum deduction in case of Roth IRA maximum Modified Adjusted Income is $114,000.

In case of traditional IRA if you are participating in Employe- sponsored plan then to claim maximum deduction upto contribution limit of $6500 maximum Modified Adjusted Income is $60,000.

(A) As the total Modified Adjusted Income is $36,800($3000 +$33800) , maximum deductible IRA Contribution is $6,500.

(B) As total modified adjusted income is $36,800 and John is participating in employer sponsored plan, John's earning is within limit of $60,000, the maximum deductible IRA CONTRIBUTION is $6,500

(C) If John is not participating in employer sponsored plan and having earned income of $18,600, his total income will be $52,400($33,800+$18,600). Maximum Deductible IRA contribution is $6,500