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Situation:
Married Couple
Filing jointly
Both 67 years of age
Wife is fully retired
Husband is self employed with gross income from business of $15K. Net income after business deductions is $10,553.

Question:
For tax year 2010, what is maximum amount that can be put into an IRA for each? $5K each or $6K each?

Thank you & Regards
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It's based on net, not gross, earnings from self-employment, but with a few twists. See page 8 of IRS Publication 590 http://www.irs.gov/pub/irs-pdf/p590.pdf

-drip
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Net income after business deductions is $10,553.

For tax year 2010, what is maximum amount that can be put into an IRA for each? $5K each or $6K each?


The maximum into either spouse's IRA is $6000. And the total of the two IRA contributions cannot exceed $10,533.

--Peter
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The maximum into either spouse's IRA is $6000. And the total of the two IRA contributions cannot exceed $10,533.

In infer from the OP that the $10,533 figure is the Schedule C bottom line. That needs to be reduced by the adjustment to income for 1/2 of the S/E tax on line 27 of the 1040. The net is the total allowable IRA contribution for the two spouses combined.

Phil
Rule Your Retirement Home Fool
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In infer from the OP that the $10,533 figure is the Schedule C bottom line. That needs to be reduced by the adjustment to income for 1/2 of the S/E tax on line 27 of the 1040. The net is the total allowable IRA contribution for the two spouses combined.

Hi Phil,

Thank you for your response. However, I do not understand what the above means. Could you explain further and in more detail as to what needs to be reduced and why.

Is my understanding correct: If line 27 on my 1040 is calculated at $667 then I should subtract $667 from the $10,533 figure on Schedule C to get $9866 and that is the total that we can put into an IRA?

Regards
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Is my understanding correct: If line 27 on my 1040 is calculated at $667 then I should subtract $667 from the $10,533 figure on Schedule C to get $9866 and that is the total that we can put into an IRA?

That is correct. I had forgotten about that adjustment in my earlier reply because ... well ... ummmm ... I depend on my software a bit too much sometimes.

--Peter
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Thank you Phil!
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Thank you Peter!
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Could you explain further and in more detail as to what needs to be reduced and why.

You have the "what" down perfectly. The "why" is because that's the way the law defines net earnings from self-employment, which is available as a basis for IRA contributions.

Phil
Rule Your Retirement Home Fool
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