IRA Deductibility for Partial Work Year
A 52 year old client was laid off in April. He had contributed only $7500 of a maximum 22k (with catch up) during that time to the firm’s 401k plan.
His new firm, where he will begin work in early July, will not let him join their 401k until next year– so, he will not be able to save the full amount.
Can he claim a full deductible IRA for this year or some proportion of a full IRA? If so, how is it calculated?
Permalink Submitted by Denise Appleby on Fri, 2009-05-22 15:53
[quote=”robert_taylor”]A 52 year old client was laid off in April. He had contributed only $7500 of a maximum 22k (with catch up) during that time to the firm’s 401k plan.
His new firm, where he will begin work in early July, will not let him join their 401k until next year– so, he will not be able to save the full amount.
Can he claim a full deductible IRA for this year or some proportion of a full IRA? If so, how is it calculated?[/quote]
the following is a quote from the article available at http://www.retirementdictionary.com/articles/29/active-participant-statu…
[quote]Even de minimis participation counts: If you are an active participant only for a few weeks in the year, and/or your contribution is only a few dollars, you are still considered an active participant. This is important for someone who knows he/she will be leaving a job shortly after the New Year begins, or an individual who becomes eligible to participate in the plan near the end of the year. Making a salary deferral contribution of $200, even if the employer matches the contribution 100% may not be worth giving up the eligibility to deduct an IRA contribution of $5,000.[/quote]
For the formula, see IRS Publication 590 at http://www.irs.gov, or http://www.retirementdictionary.com/definitions/activeparticipant