Can I contribute to an IRA if I’m unemployed?

by James D. Adelsperger, CPA | May 15, 2018
askacpaicon I was laid off in 2018. I was in the 401(k) plan where I worked. I receive subpay, but no further contributions are going to my 401(k). Can I contribute to an IRA for 2018?

Answer: If you have wages or self-employment earnings, you can contribute to an IRA in any year. The maximum contribution for 2018 is $5,500 (plus another $1,000 “catch-up” contribution if you are over age 50). IRS publishes deduction limits annually on their website

The better question is if your contribution would be deductible or not. If you are single and an active participant in a qualified retirement plan at any time in the year, your IRA deduction is phased out over a range of $63,000-$73,000 of modified adjusted gross income (MAGI). If your filing status is married filing jointly, then the deduction is phased out over a range of $101,000-$121,000 of MAGI.

Unemployment benefits are not counted as wages for IRA contribution purposes. However, wages you earned before being laid off could be used to support an IRA contribution.

Answered by: James D. Adelsperger, CPA, is senior wealth advisor at Domani Wealth in York, Pa.

The responses are based on the limited information provided by the questioner and apply the laws and regulations at the time of posting. Other options could arise as rules and regulations may change over time, including but not limited to the passage of the Tax Cuts and Jobs Act of 2017. They are intended to provide general information, not specific accounting or tax advice; they are not intended or written to be used and cannot be used for the purpose of avoiding or evading taxes or penalties under the IRS code or regulations. Views expressed do not imply an opinion of the PICPA, its officers, directors, employees, or members.
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