Joan a 54-year-old single taxpayer earn 49,000 in wages she is covered by an employer-sponsored retirement plan what is her maximum allowable contribution to a traditional IRA for 2023
The correct answer and explanation is:
For the 2023 tax year, Joan, a 54-year-old single taxpayer earning $49,000 in wages and covered by an employer-sponsored retirement plan, can contribute up to $6,500 to a traditional IRA. Since she is under 50, she is not eligible for the $1,000 catch-up contribution.(investopedia.com)
Contribution Limits
The IRS sets annual contribution limits for IRAs. For 2023, the maximum contribution is $6,500 for individuals under 50 and $7,500 for those 50 or older . Joan’s earned income of $49,000 is sufficient to allow her to contribute the full $6,500, as contributions cannot exceed taxable compensation.(investopedia.com)
Deductibility of Contributions
Since Joan is covered by an employer-sponsored retirement plan, her ability to deduct traditional IRA contributions on her tax return is subject to income limits. For single filers in 2023, the deduction phases out between a modified adjusted gross income (MAGI) of $73,000 and $83,000. With a MAGI of $49,000, Joan falls below the phase-out range, making her eligible for a full deduction of her IRA contribution .(irs.gov)
Summary
- Maximum Contribution: $6,500
- Catch-Up Contribution: Not applicable (under age 50)
- Deductibility: Fully deductible due to MAGI being below $73,000(investopedia.com, irs.gov, irs.gov)
Therefore, Joan can contribute $6,500 to a traditional IRA for 2023 and deduct the full amount from her taxable income.