Both my wife and I are receiving Social Security and dividends. I receive a pension. Can we take a deductible IRA contribution?

Asked by Michael

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Answered by Linda A. Stortz, CPA, EA in Seminole, FL
You must be asking if you can "make" an IRA contribution, rather than "take" an IRA contribution. No, either one of you must have earned compensation from wages, salary, bonuses, commissions, or self-employment income in order to make an IRA contribution. Compensation doesn't include interest, dividends, Social Security benefits, rent, and pensions. | 09.29.14 @ 18:56
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$commenter.renderDisplayableName() — {comment} | 12.08.16 @ 20:04
Taking a deductible IRA contribution depends on your Adjusted Gross Income or AGI. Your AGI is affected by Pensions and SS Benefits you received. Portions of these (Pensions and SS Benefits), maybe taxable up to a certain percentage. So, the IRA deductible contribution maybe reduced down to a zero level. | 09.30.14 @ 12:31
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Michael Keeler, CFP®, CLTC in Las Vegas, NV — Actually, this isn't correct. You must have earned income to do an IRA contribution. Social Security and pension payments aren't considered earned income. | 03.06.15 @ 00:06
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$commenter.renderDisplayableName() — {comment} | 12.08.16 @ 20:04
Answered by Rudy Ruiz, Financial Adviser in Camarillo, CA
In order to make an IRA deductible contribution there needs to be earned income ( i.e. Wages, Salary, Tips). However, there are two questions that come to mind; Are you over 70 1/2 and are either of you working? When you reach the age of 70 1/2, a person cannot make deductible contributions even if they are still working. Second, if either spouse is still below the said age and working possibly part time ( which I assume is not the case since your question specifically states where both of your sources of income comes from) then they may be able to make a contribution. I would suggest to speak to your tax advisor to find ways to minimize your tax liability which I assume must be an issue for you since your asking this question. He may refer you to an financial advisor that can work together with all of you to find a solution. | 10.13.15 @ 22:55
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$commenter.renderDisplayableName() — {comment} | 12.08.16 @ 20:04
Answered by Barry Rabinowitz, Financial Adviser in Plantation, FL
No. You must have "earned income"to make an IRA contribution. Unearned income: pension, dividends or interest does not qualify. | 04.26.16 @ 19:35
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$commenter.renderDisplayableName() — {comment} | 12.08.16 @ 20:04
B
Answered by Bob
#1 your age and your spouses age is a factor
#2 do you have any earned income?
#3 if you have no earned income you may want to focus on tax free investments like municipal bonds or tax deferred accounts.
#4 if you have earned income you may be able to contribute to an IRA depending on your age and income amount. | 10.25.16 @ 14:57
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$commenter.renderDisplayableName() — {comment} | 12.08.16 @ 20:04
M
Answered by Michael
We both are on Social Security and sometime in 2017 we will be required to take RMD from our IRAs | 10.25.16 @ 18:36
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$commenter.renderDisplayableName() — {comment} | 12.08.16 @ 20:04
Answered by Barry Rabinowitz, Financial Adviser in Plantation, FL
Under current law, you must have earned income: a job to contribute to an IRA, and your deduction will be based on your income. I would not allow the tax benefits to be the deciding factor as to whether you make investments. | 10.25.16 @ 18:44
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$commenter.renderDisplayableName() — {comment} | 12.08.16 @ 20:04
There must be an earned income for IRA contribution to be considered a qualified deduction. | 10.25.16 @ 20:48
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$commenter.renderDisplayableName() — {comment} | 12.08.16 @ 20:04
Answered by Barry Rabinowitz, Financial Adviser in Plantation, FL
You cannot make any IRA deposit unless you have earned income. Income from interest, dividend or pension does not qualify. You need income from a job. | 11.21.16 @ 19:05
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$commenter.renderDisplayableName() — {comment} | 12.08.16 @ 20:04
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Answered by

Linda A. Stortz
Linda A. Stortz, CPA, EA in Seminole, FL

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