Question

# Leon, age 45, is an active participant in his employer’s defined benefit retirement plan, but he...

Leon, age 45, is an active participant in his employer’s defined benefit retirement plan, but he would also like to make a deductible contribution to a traditional IRA this year. Leon is married, files a joint return with his wife, and has an AGI of \$112,000 in 2019. What is the maximum deductible contribution that Leon can make to a traditional IRA?

Explanation :-

The range for taxpayers who are active participants and use the married filing jointly filing status is \$103,000 - \$123,000 for 2019.

As Leon’s AGI is within this range, he may not make a full \$6000 deductible contribution to a traditional IRA, but may make a reduced deductible contribution, as calculated by the following formula:

Reduction = [ Contribution Limit x (AGI - Lower Limit) ] / Difference in range

Therefore, Leon’s deductible contribution is reduced by \$2700 [\$6000 x [ ( \$112000 - \$103000) / \$20,000 ]

The maximum deductible contribution that Leon can make to a traditional IRA is \$3300 (\$6000 - \$2700).

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