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

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.

Pennsylvania CPA Journal

Read the latest from the Pennsylvania CPA Journal online or via the mobile app and digital edition.

Read More

CPA Now

Get the latest info on professional trends, management, and leadership skills on CPA Now.

Read More

Premier Sponsors

Platinum Sponsors

Gallagher Bollinger Logo
CPACharge


Silver Sponsors

Paychex logo
Capstan Logo
epsa USA


Bronze Sponsors

sage-logo_bright_green_rgb_2018_28469
TaxConnex_logo_TM_tagline2019
botkeeper1
Fox School of Business, Temple University


Interested in becoming a sponsor? View packages >