IRA deduction | Ed Slott and Company, LLC

IRA deduction

Trying to determine if my client can deduct a contribution to an IRA this year. He is self-employed and has a profit sharing plan but is closing it down this year. He has about $20k in earnings for 2019 and his spouse does not work. However he sold his residence this year and has about a $250k capital gain. Will the amount of the capital gain put him over the threshold for being able to deduct the contribution?

If the 250k cap gain is the taxable amount after the main residence exclusion of 500k of gain, then his MAGI will be too high for the deduction since he was an active retirement plan participant for 2019 if a contribution was made to the PS plan any time in 2019. 

So if no contribution was made to the PS plan then he could deduct the IRA contribution?

Yes, since neither spouse is an active participant for 2019.


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