maximum compensation to contribute to Traditional IRA
I got a call today. husband and wife filing joint participating in an a retirement plan made more than 200,000.00 in 2008. did they qualify to make a contribution to tradition IRA? I say no. correct? what is the maximum compensation allowed to make a contribution to Traditional IRA?
Permalink Submitted by Alan Spross on Fri, 2009-03-27 23:05
There is no maximum income to make a TIRA contribution that is non deductible, but there is a limit if a deduction is desired. If both spouses are retirement plan participants, then the deduction starts to be phased out at 85,000 joint modified AGI and is totally lost at 105,000. Therefore, their income is far in excess of the amount allowed to deduct contributions.
This couple may be candidates to make non deductible TIRA contributions for 2008 and 2009, and they can then convert these TIRAs in 2010 or later when there is no longer an income limit for Roth conversions. This works particularly well if the couple has no prior TIRA accounts holding pre tax amounts, since most of the conversion would be tax free if the only TIRA contributions were these non deductible contributions. Only the earnings would be taxable upon conversion, and 2010 conversions are not taxable until 2011 and 2012, so there is some added tax deferral benefits.