If one gets hit with the AMT, does that mean that a "deductible" $4K contribution made to an IRA for that year, is no longer deductible?

In other words, does the AMT allow for a tax deductible IRA contribution, or is that yet another deduction that is allowed under the regular scheme, but disallowed under AMT?

Thank you for answering.

If you're subject to the AMT, certain items that are deductible when calculating the regular tax are no longer deductible. That includes your personal exemptions, as well as your deduction for state and local income taxes, and your real estate taxes. You'll also find that your miscellaneous itemized deductions, which include your unreimbursed employee business expenses, are also capped.

The good news is that certain deductions, including your mortgage interest**, charitable contributions, and your allowable IRA contributions are deductible under the regular tax and the AMT. Don't forget that your IRA is only deductible to you if you (or your spouse) aren't covered under a retirement plan at work during the year, or you are covered, but your income falls below a certain threshold.

**(Certain equity loan interest isn't allowable when calculating the AMT if you borrowed against the equity of the home, and did not use that money to purchase or improve your primary residence or second home, or pay off mortgage debt that previously was fully allowable for the ATM.)

Zip Code: 01801

Hi,

This is an interesting topic. I was not covered under any retirement plan during my first year at work. But my income is high enough. Were my IRA contributions deductible? ( My wife worked part time during the year). Thanks.

Ben

Zip Code: 14534

If your spouse was covered under a retirement plan at work, and your combined AGI exceeded $160k, you weren't elibible to make a deductible IRA contribution even though you weren't covered under a retirement plan that year.

If your AGI fell between $150k and $160k, you were eligible to deduct the prorata portion of your IRA contribution.

And any year that you make non-deductible IRA contributions, make sure to complete and attach a Form 8606 to your federal tax return. On that form, you keep track of your post-tax contributions to your IRA. Whenever you begin drawing money from your IRAs, you'll need to know your total non-deductible contributions over the years.

Finally, remember that you can only go back and amend returns from 2004, 2005 or 2006. Assuming you filed returns for the other years on a timely basis, those years are closed for you.

Zip Code: 01801