Nondeductible contribution

Nondeductible contribution

A contribution to either a traditional IRA or Roth IRA. Income tax is due on the contribution in the tax year for which the contribution is made.

Nondeductible Contribution

A contribution to a retirement plan where the amount is taxable. For example, if one makes $2,000 in nondeductible contributions, one must still pay taxes on that $2,000 even though it was placed in a retirement plan. Nonqualifying plans usually have nondeductible contributions. Likewise, a Roth IRA takes nondeductible contributions, but this is because withdrawals following retirement are tax free.
References in periodicals archive ?
Dunn argued that his 2008 nondeductible contribution was an excess contribution eligible to be carried forward to 2009 and deducted on the 2009 return (when he was no longer an active participant in an employer retirement plan).
An economic stimulus payment or tax refund that was directly deposited into a traditional IRA as a nondeductible contribution.
If an individual makes a nondeductible contribution to a traditional IRA for any year, he must report on Form 8606 (a) the amount of the nondeductible contributions for the taxable year, (b) the amount of distributions from individual retirement plans for the taxable year, (c) the excess of the aggregate amount of nondeductible contributions for all preceding years over the aggregate amount of distributions that were excludable from income for such taxable years, (d) the aggregate balance of all individual retirement plans as of the close of the year in which the taxable year begins, and (e) any other information as prescribed by the Secretary of the Treasury.
A nondeductible contribution to a traditional IRA contribution may result if the individual (and/or his spouse) are active participants in an employer-sponsored qualified retirement plan and the individual (and/or jointly with his spouse) have a MAGI which exceeds the threshold amount.
For example, if an intercompany transaction is challenged by the taxing authority on the basis that a payment is considered a nondeductible contribution to capital and the enterprise's position that the payment is fully deductible does not satisfy the probable threshold for initial recognition, no benefit would be realized.
A Coverdell Education Savings Account, with a nondeductible contribution limit of $2,000 a year, also helps you save for college, with earnings growing tax free.
The nondeductible contribution amount is still limited to the lesser of your earned income or the IRA contribution limit ($4,000 for 2005).
First, Cheryl would make a $5,000 nondeductible contribution to her traditional IRA.
In some cases, however, you might find that you cannot make a deductible contribution to a traditional IRA or a nondeductible contribution to a Roth IRA.
1, 1998, an individual who meets the income limitations can make an annual nondeductible contribution to a Roth IRA up to the excess of the lesser of $5,000 currently or 100 percent of the individual's earned income, minus the aggregate amount of contributions for the tax year to all other individual retirement plans (other than Roth IRAs or employer contributions to Simplified Employee Pension and Simple IRAs) maintained for the benefit of that individual.
Thus, a volunteer's charity work is a nondeductible contribution of personal services (Taylor, T.
Those not eligible can still make a nondeductible contribution in 2009.