Question

My spouse made nondeductible IRA contribution...we have high AGI and TT calculates an excess contribution. Why so if this is a traditional IRA?

Forum|Forum|7 years ago
June 1, 2019
3 replies
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TurboTax Deluxe Windows

macuser_22

Employee

The IRA contribution interview will tell you the reason that it is excess - what does it say?

Is your spouse age 70 1/2 or older?

**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.**

D

dmertz

Employee

Your AGI has no effect on the amount that you are permitted to contribute to a traditional IRA. It only potentially affects the amount of that contribution you can deduct on Schedule 1 line 32 rather than treat as nondeductible on line 1 of Form 8606.

J

Jim-S

IRS Publication 590-A at pages 8-9 makes it clear that the annual limit extends to nondeductible as well as deductible contributions to a traditional IRA. As to why? I would suggest that, even though there is no upfront deduction, there is still a tax benefit in years after the nondeductible contribution is made. You're not required to pay tax on growth of the investment until it is taken out of the IRA. Assuming investment in mutual funds, you have to pay tax on required annual income distributions if that investment is not in an IRA. Having no limit on nondeductible contributions would place no limit on the ability to defer tax on such investment income. HTH