Help for Form 1040 - Lines 24 and 25 Individual Retirement Arrangement (IRA) Deduction Enter your IRA deduction on line 24. IF you file a joint return, enter your spouse's deduction on line 25. Where You Covered by an Employer Retirement Plan? If you are covered by a retirement plan (qualified pension, profit-sharing, annuity, Keogh, SEP, etc.) at work or through self-employment in 1989, your IRA deduction may be reduced or eliminated. But you can still make contributions to an IRA even if you can`t deduct them. In any case, the income earned on your IRA is not taxed until it is paid to you. The "Pension Plan" box in Box 5 of your Form W-2 should be checked if you were covered by a plan. This box should be checked even if you are not vested in the plan. You are also covered by a plan if you are self-employed and have a Keogh retirement plan. Special Rule for Married Individuals Who File Separate Returns If you were not covered by a retirement plan but your spouse was, you are considered covered by a plan if you lived with your spouse at any time in 1989. See chart on this page to find out if you can take a deduction, and, if you can, which worksheet to use. Not Covered by a Retirement Plan If you (and your spouse if filing a joint return) were not covered by a plan at work, use Worksheet 1 to figure your deduction. Covered by a Retirement Plan If you (and your spouse if filing a joint return) were covered by a plan at work, the chart on this page. It will tell you if you can take a deduction and, if you can, which worksheet to use. Nondeductible Contributions You can make nondeductible contributions to your IRA. You can do this even if you are allowed to deduct your contributions. Your nondeductible contribution is the difference between the total allowable contributions to your IRA and the amount you deduct. Example: You file as single and paid $2,000 into your IRA. You were covered by a retirement plan and your modified AGI is over $35,000 (all wages). You can`t deduct the $2,000. But you can treat it as a nondeductible contribution. Use Form 8606 to report all contributions you treat as nondeductible. Also use Form 8606 to figure the basis (nontaxable part) of your IRA and the taxable part of any IRA distribution. If you and your spouse each make nondeductible contributions, each of you must complete a separate Form 8606. Note: If you file Form 2555, Foreign Earned Income, get Pub. 590 to figure your IRA deduction. Read the following list before you do your worksheet. * You will first need to complete Form 1040 through line 23, lines 26 through 29, and figure any write-in amounts included on line 30, to figure your IRA deduction and, it applicable, nondeductible contributions. * If you made contributions to your IRA in 1989 that you deducted in 1988, do not include them in the worksheet. * If you make contributions to your IRA in 1990 (by April 16) for 1989, include them in the worksheet. * The total of your IRA deduction can't be more than the total of your wages and other earned income. * If the total of your IRA deduction plus any nondeductible contributions is less than your total IRA contributions on Form 8606 is less than your total IRA contributions for 1989, see Pub. 590 for special rules. * You must file a joint return to deduct contributions to your nonworking spouse's IRA. A nonworking spouse is one who had no wages or other earned income in 1989, or a working spouse who chooses to be treated as having no earned income for figuring the deduction. * Do not include rollover contributions in figuring your deduction. See the instructions for lines 16a and 16b for more details on rollover contributions. * Do not include trustee`s fees that were billed separately and paid by you for your IRA. These fees can be deducted only as an itemized deduction on Schedule A. * Alimony payments received under certain divorce or separation instruments are considered earned income for purposes of the IRA deduction. See Pub. 590. * If you were married and both spouses worked and both had IRAs, figure each spouse's deduction separately. * You should receive a statement by May 31, 1990, that shows all contributions to your IRA for 1989. ` If you (or your spouse if filing a joint return) were covered by retirement plan and-- and your modified Your filing status is: AGI* is: You can take Full IRA deduction $25,000 or less (use Worksheet 1) Single or Head of Over $25,000 but Partial IRA Household less than $35,000 deduction (use Worksheet 2) $35,000 or more No IRA deduction (see Nondeductible Contributions) ------------------------------------------------------------------ Full IRA deduction Married Filing $40,000 or less (use Worksheet 1) Jointly or Qualifying Widow(er) with Over $40,000 but Partial IRA dependent child deduction (use less than $50,000 Worksheet 2) $50,000 or more No IRA deduction (see Nondeductible Contributions) ------------------------------------------------------------------ Over $-0- but less Partial IRA than $10,000 deduction (use Married Filing Worksheet 2) Separately $10,000 or more No IRA deduction (see Nondeductible Contributions) ------------------------------------------------------------------ * Modified AGI (adjusted gross income) is the amount on Form 1040, line 23, minus the total of any deductions claimed on Form 1040, lines 24 and 26 through 29, and any write-in amount included on line 30.