Author Topic: IRA deductibility question.  (Read 1280 times)

frugally

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IRA deductibility question.
« on: November 12, 2015, 02:57:02 PM »
Hi Folks -

I'm trying to figure out whether or not my wife (married, filing jointly) can monetize her blog and still allow us to contribute to traditional IRAs for both of us.  My understanding is yes but I'll post the numbers here:

Me - MAGI $90000, covered by a workplace retirement plan
Her - MAGI $500, no workplace retirement plan since she is self-employed technically.

I assume we'd be able to both still contribute $5500 each to a traditional IRA?  My confusion point is her earned income - if she earns $500 and was single she'd only be able to contribute $500 to a traditional IRA.

Thanks!

seattlecyclone

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Re: IRA deductibility question.
« Reply #1 on: November 12, 2015, 03:01:59 PM »
You're covered by a workplace retirement plan, so you can deduct a full $5,500 traditional IRA contribution for yourself as long as your combined MAGI stays below $98k.

She is not covered by a workplace retirement plan, so you can deduct the full $5,500 traditional IRA contribution for her as long as your combined MAGI stays below $183k.

How much either of you personally earn is irrelevant; as long as the sum is over $11,000, you can both make full contributions.

As an aside, you may want to consider opening a solo 401(k) for her. Probably not worth the hassle if the income is measured in hundreds of dollars per year, but if it gets into the thousands the tax savings might become worth the extra administrative hassle.

frugally

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Re: IRA deductibility question.
« Reply #2 on: November 12, 2015, 03:08:22 PM »
Thank you for the information seattlecyclone!  That is a really good point about the solo 401k.  I've thought the incomes were treated separately for IRA deductibility purposes for the last two years - I'm not really sure why I thought that.  Glad I got it cleared up.