Q. How much of my IRA contribution is tax-deductible?
A. It depends. First, this does not apply to Roth IRAs; they have
different rules. But, for a Traditional IRA, it depends mostly on the
amount of taxable compensation you earned in that tax year and whether or
not you, or your spouse if married, are an active participant in a qualified
plan (click highlighted words for explanation of these terms). Assuming
you, or you and your spouse jointly, earned more in taxable compensation
than the maximum deductible amount for your IRA contributions, and neither
of you are active participants in a qualified plan, you should be eligible
to deduct the full amount of your contribution up to the maximum deductible
If you or your spouse is an active participant in a qualified or
employer-sponsored plan, then the amount of your contribution that is
tax-deductible can be reduced depending on your AGI (adjusted gross income).
For example, in 2002, single taxpayersí deduction starts being reduced at
$34,000 AGI, and no part of their contribution is deductible if their AGI is
more than $44,000. For jointly filing married couples, the reduction is
based on their combined AGI. For 2002, the reduction for them begins at
$54,000 AGI, and no part of their contribution is deductible if they earn
more than a combined AGI of $64,000.