Question

Is a retiree receiving deferred compensation eligible to deduct IRA contributions?

Forum|Forum|6 years ago
March 24, 2020
1 reply
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I am retired. I receive deferred compensation from a former employer reported on a W-2. As a non-working retiree, I can no longer contribute to my former employer's sponsored retirement plans. Am I eligible to deduct Traditional IRA contributions without limitation? Does “Covered by a Retirement Plan at Work" imply a taxpayer is still working, and not a retiree receiving the benefit of having been “Covered by a Retirement Plan at Work"?

K

KatrinaB48

No, deferred compensation does not qualify as earned income eligible for deducting IRA contributions. Please refer to this IRS link for more information.

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F

fxedit

In my case, part of the W-2 income is in box 11 as "Nonqualified plans" and part is from Restricted Stock Awards (RSU) that vested. The RSU amount is not included in box 11. Both are deferred income, but since the RSU amount is not included in box 11, does that imply eligibility for the IRA deduction?

macuser_22

Employee

W-2 box 1 minus any amount in box 11 is taxable compensation for IRA contributions.

**Disclaimer: This post is for discussion purposes only and is NOT tax advice. The author takes no responsibility for the accuracy of any information in this post.**