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Active Participant status for deducting IRA contributions

Last Updated December 17, 2015

Question: 

I worked for only one month last year and then retired. I made a contribution to my traditional IRA for last year. However, I understand that I might not be eligible to claim a deduction for the contribution that I made to my IRA because I received contributions under my employer’s retirement plan. Is that correct? 

Answer: 

It depends.

If you are not an active participant, or married to an active participant, the contribution is fully deductible.

If you are an active participant, and/or married to an active participant, the deductibility of the contribution would be determined by your modified adjusted gross income (MAGI) amount and tax filing status.

Despite the fact that you worked for only one month, you can still be considered an active participant if you received contributions and/or benefits under the plan.  However, the determination of your ‘active participant ‘status depends on the type of retirement plan, your eligibly for participating in the plan and/or if contributions are made to the plan for the year.

Question answered by by Denise Appleby