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Posted by removeps-groups@yahoo.com on April 8, 2008, 12:55 pm
Please log in for more thread options wrote:
> My brother contributed 4,000.00 to his traditional
> IRA account for 2007 . His only source of income is one W2
> from an employer with income in box 1 of approx. $3,000.00.
> He contributed approx. $2,000.00 to an employer sponsored
> 401k plan . My question is the amount of earned income my
> brother has in order to determine his IRA deduction . Is the
> amount 5,000.00 or 3,000.00 ? Another way of stating the
> question is the earned income reduced by the contribution
> to the employer's 401 k plan ? If so my brother IRA deduction
> becomes only 3,000 and not 4,000.00 .
The maximum you can contribute to an IRA is min(earned income, 4000).
Change the 4000 to 5000 is over 50. There's a special rule if your
company is going broke, and the limit may be 7000 if I remember
correctly. Formula is more complicated if you are married. Earned
income includes W2, self employment income, and perhaps combat pay
that you elect to include in earned income (though I'll have to check
on this one).
--
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