Question

Ron, a single taxpayer, contributed $6,300 to his traditional IRA on November 4, 2020. He is covered under his employer's retirement program. The following is Ron's total income for 2020:

Wages: $72k

Dividends: 4.8k

Interest: 8k

Veteran ED Benefits: $5k

What is his allowable IRA deduction on his 2020 income tax return?

A 1.8K

B 0

C 6K

D 6.3K

Answer 1

Allowable IRA deduction in 2020 income tax return- Option (B)- 0

Reason:

A) Calculation of Adjusted Gross income-

i) Wages - $72,000

ii) Dividends- $4,800

iii) Interest- $8,000

iv) ED benefits- $5,000

- Gross Income(adding all)- $89,800

Less- ED benefits(tax free)- $5,000

Therefore, Adjusted Gross Income- $89,800- $5,000= $84,800

Since, Ron is a single tax payer who is already covered under a retirement plan provided by his employer and his Modified Adjusted Gross Income is greated than $75,000, his allowable IRA deduction on his 2020 income tax return is $0