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December 17, 2015

Active Participant status for deducting IRA contributions

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Active Participant status for deducting IRA contributions

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?

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.

Written By

Denise Appleby

Denise is CEO of Appleby Retirement Consulting Inc., a firm that provides IRA resources for financial/ tax/legal professionals. She has over 20 years of experience in the retirement plans field, which includes training and technical consultation.

Denise writes and publishes educational /marketing tools for advisors; available at http://irapublications.com. Denise co-authored several books on IRAs

Denise is a graduate of The John Marshall Law School, where she obtained a Masters of Jurisprudence in Employee Benefits, and has earned 5 professional retirement designations.
She has appeared on numerous media programs, sharing her insights on retirement tax laws.

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