Paulette is age 32, single, and reported AGI of $67,000 in tax year 2015. She is an active participant in her employer's pension plan. What amount of deductible IRA contribution is disallowed in 2015?

Question

Quizplus · Accepted Answer

Because Paulette is an active participant in her employer's pension plan, the phaseout range for deductible IRA contributions in 2015 is $61,000 to $71,000 for a single taxpayer. Since Paulette's AGI is within this range, she can make a deductible IRA contribution, but it will be partially phased out. The maximum amount she can deduct is $3,300, calculated as follows:

$5,500 (the 2015 IRA contribution limit) - [$1,000 x ($67,000 - $61,000) / $10,000] = $3,300

Therefore, $3,300 of Paulette's IRA contribution will be disallowed as a deduction on her tax return.

Paulette Is Age 32, Single, and Reported AGI of $67,000