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I switched to a job in 2012 which didn't offer a retirement plan in October, 2012. Prior to this job, I was covered with an IRA account from my previous employer. I will be filing the returns with my spouse who is covered with a retirement plan through her work.

I read that one can claim a deduction when no retirement plan is offered at work. I would like to contribute the maximum amount towards a Traditional IRA account that I set up with someone like Fidelity. Will my contribution be deductible for the 2012 tax return? Additionally, how much amount can I contribute for a maximum deduction?

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  • IRA = Individual Retirement Account. Could you clarify what you mean by "an IRA account from my previous employer"? Was this a SEP or SIMPLE IRA plan as mhoran_psprep suggests or did you write IRA instead of 401k? Also, in addition to being considered as covered by a retirement plan because of your wife's employment, you yourself are covered by a retirement plan as of October 2012 through your own employment even if you declined to participate in your employer's retirement plan.
    – Dilip Sarwate
    Dec 30, 2012 at 14:37

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The key will be BOX13 on the W2. If it is checked then a person was covered by a retirement plan, even if it was only for one day.

The area of confusion for the answers you will be getting will be the "IRA" is it a:

IRA-based plan (SEP, SARSEP or SIMPLE IRA plan) and you had an amount contributed to your IRA for the plan year that ends with or within the tax year

For your particular case, because your wife is covered by a plan, you are considered covered by a plan.

Your deduction may be limited if you (or your spouse, if you are married) are covered by a retirement plan at work and your income exceeds certain levels.

The actual limits will depend on your filing status and your MAGI.

Remember that you don't have to actually make the IRA contribution until the April due date for taxes, most years that is April 15th. Therefore you can wait until all W2s are in, forms completed, then and you can see if you can/should make a deductible or Roth contribution. You can even send your refund directly to the IRA. You must make sure that the IRA custodian knows which Tax Year to apply any contributions to, because it is not clear for contributions made between January 1st and tax day.

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  • "because your wife is covered by a plan, you are considered covered by a plan" But it's very different. If you are covered by a plan, the limits are super low. If you are not covered by a plan but your wife is, the limits are very high.
    – user102008
    Jan 31, 2013 at 2:23
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"covered by a retirement plan at work" means at any time during the year. So if you were covered by a retirement plan at your previous employer, who paid you during any part of 2012, then that would count. Now, I am not sure whether that "IRA account" you are talking about counts as an employer retirement plan, but you can tell from whether the middle box on line 13 is checked on the W-2 form from that employer when you get it.

If you were considered covered by a retirement plan at work, then your phase-out for deduction for married filing jointly, is an MAGI of $92K - $112K.

If you were considered not covered by a retirement plan at work, then since your spouse is covered by a retirement plan at work, the phase-out for deduction for married filing jointly is an MAGI of $173K - $183K. If you are below this, you can deduct your full contribution (contributions, of course, are limited to $5000 per year).

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