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IRS Tax Deduction Allowed for IRA/401K contributions in 2019

By Terry Savage on June 24, 2020 | Investments

What are the income limits for 2019 in order to be eligible to get tax credit for contributions to IRAs and/or 401k accounts for a taxpayer with a filing status of single? I’ve checked the 1040, Schedule 3 and Form 8880 and would like to be able to determine if I am eligible to get a tax credit.

Terry Says

You don’t get a “credit” for a retirement plan contribution — traditional IRA or 40l(k). You get a tax DEDUCTION for your contribution. The 40l(k) plan will tell you the allowable maximum contribution to your plan each year. Your can contribute $6,000 a year to a traditional or Roth IRA if you are under age 50. Over that age, you can contribute an additional $1,000 per year.
BUT if you are single and earn over $75,000 a year, AND are also covered by a 40l(k) plan, then you don’t get ANY deduction for the traditional IRA contribution. (The deduction starts phasing out at $65,000 of income and disappears at $75,000 for a single person.) So you’d be better off putting the money in a Roth IRA, where although you don’t get a deduction, the money will grow tax-free for retirement.

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