Question

Sam, 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. Sam is married, files a joint return with his wife, and has an AGI of $117,000 in 2022. What is the traditional IRA contribution reduction amount?

Answer 1

Sam's traditional IRA contribution reduction amount would be $1,200.

Step-by-step explanation:

Sam, being an active participant in his employer’s defined benefit retirement plan, may be subject to a reduction in his deductible contribution to a traditional IRA due to his income level. The reduction is determined using the AGI limits set by the IRS for each tax year. In 2022, for married individuals filing jointly, the AGI limit for a full traditional IRA deduction is $105,000. Sam's AGI is $117,000, which exceeds the limit. To calculate the reduction amount, we subtract the AGI limit from Sam's AGI and divide the result by $10,000. The output is then multiplied by $1,000. Therefore, Sam's traditional IRA contribution reduction amount would be $1,200.