Salvage IRA contribution after divorce — Business Management Daily: Free Reports on Human Resources, Employment Law, Office Management, Office Communication, Office Technology and Small Business Tax Business Management Daily

Salvage IRA contribution after divorce

Get PDF file

by on
in Small Business Tax

Q I went through a bitter divorce and ended up quitting my job. In 2006, I did not earn any wages, but I had investments and received alimony. Can I contribute to an IRA? V.M., Concord, N.H.

A Yes. Although investments and other “unearned” income do not count for IRA purposes, alimony does. Therefore, you can contribute up to the lesser of the alimony received in 2006 or $4,000 ($5,000 if you’re age 50 or over). Assuming you are a single filer for 2006, you can deduct your IRA contribution if you were not an active participant in an employer-sponsored retirement plan.

Tip: If you were an active participant in 2006, the deduction phases out for an AGI between $50,000 and $60,000, even if most of the income is unearned.

Related Articles...

Leave a Comment

Previous post:

Next post: