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Everyone is eligible to establish and maintain an IRA, but whether your contributions into the IRA this year will be deductible depends on your (or, if married, you and your spouse's) income level and whether or not you are covered by another pension plan at work.
Neither spouse covered. If neither you nor your spouse is covered under another retirement plan, you may both take full advantage of the tax deduction for the amount contributed, regardless of your income level.
AGI limits when you are covered. If the individual making the contribution is covered under another retirement plan, the amount of the contribution eligible for deduction is determined by the filing status and the modified adjusted gross income (MAGI) of the couple. Note that the test here is MAGI - not earned income. That means that interest, dividends, capital gains, etc. are included in the total; what's more, AGI for this purpose is computed without considering the exclusion of Series EE bond interest shown on Form 8815, or the exclusion of employer-paid adoption expenses shown on Form 8839.
|
| 2011 Maximum IRA Deduction if Covered by a Retirement Plan | ||
|---|---|---|
| If you file a single or head of household return and modified AGI is no higher than: | If you file a joint return and modified AGI is no higher than: | Maximum deduction is lesser of 100% of compensation or |
| $56,000 | $90,000 | $5,000 |
| $57,000 | $92,000 | $4,500 |
| $58,000 | $94,000 | $4,000 |
| $59,000 | $96,000 | $3,500 |
| 60,000 | $98,000 | $3,000 |
| $61,000 | $100,000 | $2,500 |
| $62,000 | $102,000 | $2,000 |
| $63,000 | $104,000 | $1,500 |
| $64,000 | $106,000 | $1,000 |
| $65,000 | $108,000 | $ 500 |
| $66,000 | $110,000 | $ 0 |
The preceding table shows the limits that apply for 2011.
AGI limits when only one spouse is covered. If the individual making the contribution is not covered by another retirement plan at work, but his or her spouse is covered by such a plan, the non-covered individual may make deductible contributions to an IRA. The AGI phaseout range in 2011 for such contributions is $169,000 to $179,000, as shown on the following chart.
| 2011 Maximum Contribution if One Spouse Is Covered by a Retirement Plan |
|
|---|---|
| If you file a joint return and AGI is no higher than: | Maximum deduction is lesser of 100% of compensation or |
| $169,000 | $5,000 |
| $170,000 | $4,500 |
| $171,000 | $4,000 |
| $172,000 | $3,500 |
| $173,000 | $3,000 |
| $174,000 | $2,500 |
| $175,000 | $2,000 |
| $176,000 | $1,500 |
| $177,000 | $1,000 |
| $178,000 | $ 500 |
| $179,000 | $ 0 |
Claiming the deduction. If your contribution to an IRA is deductible, you don't need to file any special form to claim it, nor do you need to itemize deductions on Schedule A. Simply write the amount of your contribution (and your spouse's contribution, if married filing jointly) on Line 32 of Form 1040, or Line 17 of Form 1040A.
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