Question

Not getting Tax credit for traditional IRA amount

Forum|Forum|3 years ago
March 1, 2023
1 reply
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Why I am not getting full tax credit the money that I deposit to my traditional IRA account? I can deduct only $300 of the contribution. I don't have a retirement plan with my company I do have 401K option. Also I am within my gross income range $109K to $129K not over $129K bit less than the max range. Any idea why I am just getting tax credit for $300 not for $7K? Do I need to go for Roth IRA?

M

MAK70

Your traditional IRA contributions may be tax-deductible. The deduction may be limited if you or your spouse is covered by a retirement plan at work and your income exceeds certain levels.

See IRA Deduction if You Are NOT Covered by a Retirement Plan at Work - 2022 (deduction is limited only if your spouse IS covered by a retirement plan) and IRA Deduction if You ARE Covered by a Retirement Plan at Work - 2022.

S

Sam KhanAuthor

So I am not getting the tax credit because my gross salary is between $109K and $129K and I have a 401K plan from the company?

M

MAK70

Yes, if your employer has an established retirement plan, your deduction is limited, even if you do not participate at work.

You’re covered by an employer retirement plan for a tax year if your employer (or your spouse’s employer) has a:

Defined contribution plan (profit-sharing, 401(k), stock bonus and money purchase pension plan) and any contributions or forfeitures were allocated to your account for the plan year ending with or within the tax year;

IRA-based plan (SEP, SARSEP or SIMPLE IRA plan) and you had an amount contributed to your IRA for the plan year that ends with or within the tax year; or

Defined benefit plan (pension plan that pays a retirement benefit spelled out in the plan) and you are eligible to participate for the plan year ending with or within the tax year.

@Sam Khan