Michael is single and 35 years old. He is a participant in his employer’s sponso
ID: 2451202 • Letter: M
Question
Michael is single and 35 years old. He is a participant in his employer’s sponsored retirement plan. How much can Michael contribute to a Roth IRA in each of the following alternative situations? (Leave no answer blank. Enter zero if applicable.)
Michael’s AGI is $51,500 after he contributed $3,400 to a traditional IRA.
contribution to Roth IRA__________________________
B. Michael’s AGI is $81,500 before any IRA contributions.
contribution to Roth IRA__________________________
a.Michael’s AGI is $51,500 after he contributed $3,400 to a traditional IRA.
contribution to Roth IRA__________________________
B. Michael’s AGI is $81,500 before any IRA contributions.
contribution to Roth IRA__________________________
Explanation / Answer
Answers :
a) Michael can contribute $2,100 towards Roth IRA.
Note: Michael has contributed $3,400 to a traditional IRA. Because his AGI was below the phase-out threshold, he was able to deduct all $3,400 of that contribution. Because a taxpayer’s contributions to traditional and Roth IRAs may not exceed $5,500 (taxpayers under 50 years of age) and because his AGI is below the Roth IRA phase-out threshold, he may contribute $2,100 to the Roth ($5,500 total minus $3,400 contribution to traditional IRA).
b) $5,500.
Michael’s AGI is too high to contribute to a deductible IRA. So, Michael has the option of contributing to nondeductible traditional IRA and/or a Roth IRA. In total, he can contribute $5,500. So, he can contribute $5,500 to a Roth IRA. Because the Roth IRA is superior to a nondeductible traditional IRA, Michael should contribute to the Roth IRA not the nondeductible traditional IRA.