Author Topic: Traditional IRA Deduction question- Marriage  (Read 2350 times)

purplepear

  • Stubble
  • **
  • Posts: 235
  • Age: 33
  • Location: Oregon
Traditional IRA Deduction question- Marriage
« on: May 29, 2015, 11:59:22 AM »
My boyfriend and I have been dating for 4 years, plan on being life partners, and have recently started to toss around the idea of actually getting married. Mostly for pragmatic & legal protection reasons.

Along those lines, I was looking at the Traditional IRA Deduction income limits for married couples, and I'm wondering if I understand this correctly. (For reference: http://www.irs.gov/Retirement-Plans/2015-IRA-Deduction-Limits-Effect-of-Modified-AGI-on-Deduction-if-You-Are-Covered-by-a-Retirement-Plan-at-Work)

Currently, my boyfriend and I are both working, make a similar income, both max out our 401Ks, both max out HSAs, and are starting to contribute to traditional IRAs.

Unmarried Scenario:
  • Let's say each of us make $80K
  • Individual MAGI = 80K - 18K (401k) - 3.3K (HSA) = $58.7K
  • Each of us is under the limit and can deduct the full $5,500 IRA contribution. Yay!

Married Scenario:
  • Total MAGI = $58.7K x 2 = $117.4K
  • As a couple, we are over the MAGI limit and neither of us can deduct our IRA contributions. :(

Is my understanding correct?

chicagomeg

  • Handlebar Stache
  • *****
  • Posts: 1196
Re: Traditional IRA Deduction question- Marriage
« Reply #1 on: May 29, 2015, 12:21:07 PM »
Yes. Most MFJ income caps are 2x the single ones, this is just an odd anomaly in the tax code.

forummm

  • Walrus Stache
  • *******
  • Posts: 7374
  • Senior Mustachian
Re: Traditional IRA Deduction question- Marriage
« Reply #2 on: May 29, 2015, 12:35:55 PM »
There are a bunch of ways that being married can increase or decrease your taxes. It's complicated.

Here's a cool graphic looking at tax amounts for different scenarios:
http://www.nytimes.com/interactive/2015/04/16/upshot/marriage-penalty-couples-income.html

purplepear

  • Stubble
  • **
  • Posts: 235
  • Age: 33
  • Location: Oregon
Re: Traditional IRA Deduction question- Marriage
« Reply #3 on: May 29, 2015, 12:51:16 PM »
There are a bunch of ways that being married can increase or decrease your taxes. It's complicated.

Here's a cool graphic looking at tax amounts for different scenarios:
http://www.nytimes.com/interactive/2015/04/16/upshot/marriage-penalty-couples-income.html

Sweet graphic. Thanks!

forummm

  • Walrus Stache
  • *******
  • Posts: 7374
  • Senior Mustachian
Re: Traditional IRA Deduction question- Marriage
« Reply #4 on: May 29, 2015, 01:30:49 PM »
There are a bunch of ways that being married can increase or decrease your taxes. It's complicated.

Here's a cool graphic looking at tax amounts for different scenarios:
http://www.nytimes.com/interactive/2015/04/16/upshot/marriage-penalty-couples-income.html

Sweet graphic. Thanks!

Glad to be of service <tip of the top hat>

 

Wow, a phone plan for fifteen bucks!