Some IRA Guidance
I sometimes find it amazing how much misinformation can be in the mainstream news media on how working Americans can not contribute to an IRA if they are covered by a retirement plan at work. This is simply not true. Any farmer that has earnings in excess of $5,000 ($6,000 if over age 49 and want to take full advantage of the amount they can contribute) can contribute to an IRA no matter if they are covered by a retirement plan or how much their adjusted gross income is.
The potential drawback if covered by a retirement plan AND your income is too high, then the IRA contribution may not be fully deductible.
If you are not covered by a retirement plan, you can make a deductible IRA contribution no matter what your gross income is. If one spouse is covered by a retirement plan, the other spouse can make and deduct an IRA if the total gross income is less than $173,000 (these are all 2012 numbers).
If both husband and wife is covered by a retirement plan, then you can still contribute to an IRA, but it is only 100% deductible if your adjusted gross income is less than $92,000. It is phased out between $92,000 and $112,000. For single taxpayers, the phaseout starts at $58,000 and ends at $68,000.
Remember, if y0u have earned income in excess of $6,000, you can make an IRA contribution, you just may not be able to deduct it.
Paul Neiffer is a certified public accountant and business advisor specializing in income taxation, accounting services, and succession planning for farmers and agribusiness processors. Paul is a principal with CliftonLarsonAllen in Walla Walla, Washington, as well as a regular speaker at national conferences and contributor at agweb.com. Raised on a farm in central Washington, he has been immersed in the ag industry his entire life, including the last 30 years professionally. Paul and his wife purchase an 180 acre ranch in 2016 and enjoy keeping it full of animals.
Might be more accurate to say: anyone who has earned income can contribute that earned income, up to $5,000 ( or $6,000 if over 49) to an traditional IRA. If an individual’s earned income is only $3,000, that is all he/she can contribute. The deductability is, as you say, a separate issue.