Credit Card Promotional IRA
Hello-
Client has a small Traditional IRA they received as a part of a credit card promotion.
1. Do they take a deduction for the contribution on their tax return?
2. If not, would it be considered pre-tax or after-tax?
3. Can this just be consolidated in with other Traditional IRAs they own?
Thank you!
Permalink Submitted by Alan - IRA critic on Tue, 2021-08-17 19:55
They can if they qualify and have not previously used up the contribution limit.
If they do not qualify for the deduction, the contribution would be non deductible and Form 8606 would need to be filed to report the contribution as non deductible.
Yes, as far as the IRS is concerned. However, the CC company is probably using their own bank or IRA custodian and the account may have restrictions placed on it. What if the client cannot deduct the contribution and wants to recharacterize it as a Roth contribution? What if the client had no earned income and the contribution became an excess contribution? I would be wary that this promotion is not designed to benefit the card company more than the client, since this is not a normal promotion.
Permalink Submitted by IRAQuestion5 on Thu, 2021-08-19 13:07
Thank you so much!