Question

Marlene who is single and age 52 has earned income of $38,000 and is not covered by an employer retirement plan. she wants to contribute to her traditional ira the maximum amount allowable. how much can she contribute, and will it be deductible on form 1040?

Answer 1

Marlene, who is single and age 52, can contribute up to $6,000 to her traditional IRA for the year 2021. If her MAGI is below $66,000, she can deduct the full contribution on Form 1040.

Step-by-step explanation:

Marlene, who is single and age 52, can contribute up to $6,000 to her traditional IRA for the year 2021. However, since she is not covered by an employer retirement plan and her income is within certain limits, she will be able to deduct her full IRA contribution on Form 1040.

To determine the maximum deductible amount, it is necessary to calculate her modified adjusted gross income (MAGI) based on her earned income. If her MAGI is below a certain threshold, all of her contribution will be deductible. If her MAGI is above the threshold but below the phase-out limit, her deduction will be reduced. If her MAGI exceeds the phase-out limit, she will not be eligible for a deduction. The phase-out limits for 2021 are $66,000 to $76,000 for single individuals.

Since Marlene's income is $38,000, it is below the phase-out limit. Therefore, she can contribute the maximum amount of $6,000 to her traditional IRA and deduct the full amount on Form 1040.