Question

Assuming a taxpayer has sufficient earned income to contribute the maximum allowed to a traditional IRA, the deductible IRA contribution may be phased-out based on (1) status and modified (2) (3) income. (Enter only one word per blank.)

a) Filing; Gross
b) Marital; Adjusted
c) Employment; Net
d) Tax; Total

Answer 1

The deductible IRA contribution limits can be phased out based on the taxpayer's marital status and adjusted gross income. The correct answer is b) Marital; Adjusted.

Step-by-step explanation:

Assuming a taxpayer has sufficient earned income to contribute the maximum allowed to a traditional IRA, the deductible IRA contribution may be phased-out based on (1) Marital; (2) Adjusted; (3) Gross Income. Therefore, the correct answer to the question is b) Marital; Adjusted. When referring to taxation and IRAs, contributions to traditional IRAs may be tax-deductible depending on the taxpayer's filing status, whether they have a retirement plan at work, and the level of their adjusted gross income (AGI). The AGI calculation is essential as it impacts the amount of deductions and credits you are eligible for, which in turn, affects your taxable income.