2007-03-25 07:59:34 · 3 answers · asked by Russel M 1 in Business & Finance ➔ Taxes ➔ United States
Whether you can deduct IRA contributions depends on whether you or your spouse participate in a retirement plan at work.
If neither of you participate in a retirement plan at work, you and your spouse can each contribute $4,000 to a traditional IRA and deduct that amount on your taxes. If you are in the 25% tax bracket, this saves you $2,000 in current taxes.
If you and your spouse have retirement plans, you will not be able to deduct your IRA contributions since your income is over $85K. You can still make those contributions but they are not deductible.
If only one spouse has a retirement plan at work, the deduction phases out between $150,000 - $160,000. So if you had a retirement plan but your spouse did not, your spouse could contribute $4k and you would save $1k on your taxes in the 25% bracket.
For 2006, the maximum contribution increases to 5K for taxpayers age 50 or older.
2007-03-25 08:05:21 · answer #1 · answered by ninasgramma 7 · 2⤊ 0⤋
That depends on how much you put in, and what your tax bracket is. If you or your spouse are NOT covered by a retirement plan at work, you might lower your taxes by as much as 25% of what you put into the IRA for the year, if you are in the 25% 0 or bracket. If you are under 50 and put in the maximum $4000, that could be as much as $1000 less in tax. If you're 50 or over and put in the maximum $5000, your taxes could decrease by as much as $1250. If you each make enough to contribute the maximum and each do, then those numbers could double. If you are both covered by a retirement plan at work, then you can't take a deduction.
2007-03-25 16:21:00 · answer #2 · answered by Judy 7 · 1⤊ 0⤋
It will lower your AGI by 4k. Which will probably save you $500
2007-03-25 15:09:42 · answer #3 · answered by John W 3 · 0⤊ 2⤋