Anot individual retirement account (IRA) allows those of United States to contribute a portion of their pre-tax income to a retirement fund which can then earn interest and allow for a more fruitful sum of money before this sum is eventually withdrawn before retirement.
US taxpayers can contribute up to 100% of any earned income, although thresholds may also apply. These types of contributions could also be tax deductible depending on each person’s income, tax status and other factors.
For example, the level of deduction could depend on whether or not the spouse is covered by a pension plan at his place of work and whether the person’s income exceeds certain levels.
Deposit when single
A single person who does not have an employer-sponsored retirement plan can deduct the full amount of a traditional IRA contribution. However, restrictions apply if a person is covered by a pension plan through their current employer.
If the modified AGI is $66,000 or less for 2021, or $68,000 for 2022, a full deduction is available.
For income between $66,000 and $76,000 for 2021, or $68,000 and $78,000 for 2022, a partial deduction is available.
When it comes to income that exceeds $76,000 for 2021 or $78,000 for 2022, no deduction is possible.
Deposit at the wedding
Things are different for married couples. When neither is covered by a workplace pension plan, you are entitled to a full IRA deduction, but if either is covered, certain restrictions come into play.
If the modified AGI is $198,000 or less for 2021, or $204,000 for 2022, a full deduction is applicable.
This becomes a partial deduction if income is between $198,000 and $208,000 for 2021, and $204,000 and $214,000 for 2022, but no IRA reduction is possible when income exceeds $208,000 for 2021 or $214,000 for 2022.