Question: Charles and Stephanie are married and file a joint Form 1040, U.S. Individual Income Tax Return. Stephanie works and has a salary of $141,000. Charles, a stay-at-home grandad, does not work outside the home and is receiving Social Security ($25,000 in 2022). Their total income on Line 9 of their 1040 is $166,000. Stephanie has a retirement plan through her employer. Can Charles make a deductible contribution to an IRA in 2023?
Answer: Yes. Charles can make an IRA contribution to a Kay Bailey Hutchinson IRA by using Stephanie’s earned income to make the contribution. Even though his wife is an active participant, the couple’s combined AGI is below $218,000, which is the income threshold for MFJ IRA contributions.
Stephanie’s salary is over the contribution limit of $136,000, and since she has a plan at work, she cannot make a deductible IRA contribution. She is considered an “active participant” in her company plan and is subject to a contribution limitation on that basis.
Information included in this article is accurate as of the publish date. This post is not reflective of tax law changes or IRS guidance that may have occurred after the date of publishing. All taxpayer circumstances are different, and NATP recommends contacting research services if you have specific questions about your clients’ tax situations.