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Old 03-05-2015, 06:46 PM
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IRA contribution eligible?

Retired in 2014. Received a severance distribution in 2015. The severance amount was taxed and both FICA and Medicare were deducted. In Jan 2016 I will receive a W-2 for the distribution. I will receive no other W-2(no other earned income) for 2015. Other sources of income include pension and investment income. Since FICA was taken out is the severance money considered earned income? Will I be able to make a 2015 tax deductible IRA contribution? Age 58 ,married filing joint, total income less than 100K.


Last edited by sm4378 : 03-05-2015 at 09:49 PM. Reason: More info


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Old 03-05-2015, 08:08 PM
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Originally Posted by sm4378 View Post
Recently retired in 2014. Received severance distribution in 2015 - taxed as income FICA and Medicaid also deducted. In Jan 2016 will receive W-2 for this amount. Will have no other earned income for 2015. Will I be able to make an IRA contribution in 2015?
yes; As long as you, or you and your spouse assuming you are married and filing a joint tax return have taxable compensation to contribute, you can always put money aside in a traditional IRA before the tax year you reach 70 1/2 years of age. The ability to make tax-deductible contributions can be limited, depending on whether you or your spouse is covered by an employer retirement plan. You could still contribute using after-tax dollars. The IRS stipulates that individual retirement accounts be funded with earned income. The IRS classifies severance pay as earned income



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