You Asked Us - IRA Deductibility

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Q: An individual worked for only one month this year and then retired. If that individual made a contribution to a traditional IRA, is he eligible to treat it as a deductible IRA contribution?

A: It depends.

If the individual is not an active participant, or married to an active participant, the contribution is fully deductible.

If the individual is an active participant, and/or married to an active participant, the deductibility of the contribution would be determined by his MAGI and tax filing status.

Despite the fact that the individual worked for only one month, he can still be considered an active participant if he received contributions and/or benefits under the plan.  The determination of the individual’s ‘active participant ‘ status depends on the type of retirement plan, the individual’s eligibly for participating in the plan and/or if contributions are made  to the plan.

See Active Participant for examples of when an individual is considered an active participant under a plan

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