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I am trying to make an amendment for 2020 tax year. In December 2020 I contributed $6000 for Roth Ira and $6000 for traditional Ira (I did not know any better). I used after tax money in both contributions. I was not part of any retirement plan at work; my salary was about 60,000/year. I am using TurboTax to file the amendment. Can I claim both of those contributions as deductible or since I used after tax money they are both non-deductible?

Thank you in advance!

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Based on your income information, assuming you file single and have no other income, you were eligible to make deductible contributions to a Traditional IRA and were eligible to contribute to a Roth IRA for 2020. However, the combined Roth + Traditional IRA contribution limit for 2020 was $6,000 ($7,000 if age 50+), so you may need to take corrective action to fix the overcontribution.

If you want, you can reclassify your Traditional IRA contribution as tax-deductible on your amended return. If you do, this is reported on Schedule 1 Part II (Adjustments to Income) line 20 (IRA deduction) and flows to your line 10 of your Form 1040. If you don't, you must record the non-deductible Traditional IRA contribution on Form 8606. Roth contributions are never deductible.

Onto the corrective action for the overcontribution:

You can withdraw the excess $6,000 contribution plus associated earnings from your Traditional or Roth IRA - your IRA custodian should have a "Removal of Excess Contribution Form" you can complete. You'll pay a 6% excess contribution penalty for every tax year the excess contribution remains in your account (Form 5329). Income taxes and a 10% early withdrawal penalty will be owed on the earnings as well.

Alternatively, if you didn't max out your IRA contributions for 2021, 2022, and/or 2023, you can have your 2020 excess apply as a contribution in those years (in order from earliest to latest). You may need to file an amended tax return for those years as well. You'll pay the 6% excess contribution penalty on the overcontribution every year until it becomes an eligible contribution for the tax year.

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  • I appreciate your answer! actually, I filed 2020 tax return amendment in 2023. I did not withdraw the excess, instead I left it carry over to year 2022, since i have not contributed to that year. I already paid the 6% fees and so on. It is just that when I filed 1040x for 2020 i realized I may had a mistake in there in regard to the 6000 traditional ira that I did not withdraw. I declared it as deductible, but when i was researching it I came to realize (i might be wrong and that is why I am asking the question here) that since i used after tax money it needs to be declared as non-deductible. Aug 2, 2023 at 2:01
  • my question is simply if I used after tax money to contribute my $6000 Traditional IRA do I still can declare it as deductible? Aug 2, 2023 at 2:02
  • @RachidBrah yes. What other money could you have used?
    – littleadv
    Aug 2, 2023 at 2:05
  • @RachidBrah yes, you'll use after-tax money initially to contribute to your Traditional IRA, but then decide to make it a deductible contribution on your Schedule 1. There is an income limit when participating in a workplace retirement plan to be able to deduct a Traditional IRA contribution, but that wasn't relevant for you here.
    – Stan H
    Aug 2, 2023 at 2:16
  • Thank you Stan H. It was very helpful! Aug 15, 2023 at 21:05
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Can I claim both of those contributions as deductible or since I used after tax money they are both non-deductible?

You cannot have both of them. You need to withdraw one of them. The $6000 per year limit for IRA contributions is for all contributions, Roth and traditional, any account, combined.

On top of that Roth contributions are never deductible, they're by definition from after tax funds. If you keep the Roth contribution, there's nothing to deduct.

If you keep the traditional IRA contribution, then you can claim deduction for it, though with the relatively low level of income you may be better off with the Roth if you expect your income to grow significantly in the future as your career progresses.

In any case, for the one that you withdraw (the one that ends up excess), you'll need to pay taxes on all the gains, and 6% per year excise tax on the contribution amount you were not allowed to make. See the instructions to form 5329.

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  • Thanks for your reply! actually, I filed 2020 tax return amendment in 2023. I did not withdraw the excess, instead I left it carry over to year 2022, since i have not contributed to that year. I already paid the 6% fees and so on. It is just that when I filed 1040x for 2020 I realized I may had a mistake in there in regard to the 6000 traditional ira that I did not withdraw. I declared it as deductible, but when i was researching it I came to realize (i might be wrong and that is why I am asking the question here) that since i used after tax money it needs to be declared as non-deductible. Aug 2, 2023 at 2:03
  • my question is simply if I used after tax money to contribute my $6000 Traditional IRA do I still can declare it as deductible? Aug 2, 2023 at 2:03
  • Thank you Littleadv. Your answer was beneficial! Aug 15, 2023 at 21:07

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