Where to report IRA contributions on 1040?
Learn how to report IRA contributions on Form 1040, and the specific lines on Form 1040 that matter.
An IRA is a type of retirement account that the federal government introduced to incentivize people to save for retirement. It is a tax-advantaged retirement account, and it gives retirement savers tax breaks on the amount they contribute to the account. The contributions you make to the IRA should be reported appropriately on your tax return.
If you are eligible to claim a tax deduction on your IRA contributions, you can report the IRA contributions on Form 1040 Schedule 1 Part II Adjustments to Income. Once you have calculated the amount of tax deduction, you should record this amount on line 32 of Form 1040. However, if you are not claiming a tax deduction on your IRA contribution, you should report the non-deductible contribution on Form 8606.
What is Form 1040?
Form 1040 is a federal income tax form that taxpayers use when filing federal income taxes. It is a two-page tax form that shows taxpayers how much income they earned, how much income they have to pay tax on, and whether they will receive a tax bill or a tax refund. You can also use this tax form to claim certain deductions and credit rights.
Taxpayers may also attach other forms known as schedules to Form 1040 when filing taxes. These schedules allow taxpayers to report certain types of incomes correctly, claim certain deductions, and provide any other relevant information required by the IRS.
When are IRA contributions deductible?
For 2021 and 2022, you can contribute $6,000 yearly to an IRA, or $7000 if you are 50 or older. Usually, IRA contributions are fully deductible, but different rules apply if you or your spouse have an employer-provided retirement plan, or the modified adjusted income (MAGI) exceeds certain thresholds.
If you have a retirement plan through your employer, your IRA deduction may be limited if your income exceeds certain income limits. In 2022, a single taxpayer can take a full deduction if their MAGI is below $68,000. However, the deductions start to phase out as the MAGI increases beyond this limit, and it is eliminated when the income exceeds $78,000.
Married taxpayers filing jointly will get a full deduction if their income is below $109,000. However, the deduction starts to phase out if the MAGI increases, and it is eliminated when it exceeds $129,000.
If you are not covered by an employer-sponsored plan, your IRA deductions may still be limited if the spouse is covered by an employer-sponsored retirement plan. Deductions will begin to phase out if the MAGI increases to $204,000, and will be eliminated if the MAGI exceeds $214,000.
Where to report IRA contribution
When claiming a tax deduction, you have to report the IRA contributions appropriately on your federal income tax return. Here are ways to report your IRA contributions:
Line 32 of Form 1040
When making retirement contributions to an IRA, you may qualify to take a tax deduction on your tax return. If you are eligible to take a tax deduction, you claim the deduction as an above-the-line deduction on line 32 of Form 1040. However, you can only claim a tax deduction if you or your spouse are not covered by a company retirement plan.
Line 19 of Schedule C
If you own a small business and the business makes retirement contributions to a retirement plan on behalf of its employees, you can claim these contributions as a business deduction on Schedule C of Form 1040. These deductions reduce the taxable income for the year, and also the self-employment tax.
Line 1 of Form 8606
While deductions are allowed for IRA contributions, the deductions may be limited if either you or your spouse participate in a company plan. The deductions may be eliminated if your income is higher than the IRS thresholds.
Even if you exceed the income limits, you can still contribute to an IRA up to the annual contribution limits. You can report the non-deductible IRA contribution by filing Form 8606. You should report any nondeductible IRA contributions made in the past year on line 1 of Form 8606.
Who Should Use Form 1040
When filing your taxes, you will likely use the standard version of Form 1040. This tax form has two pages and 38 lines, and you may need to attach additional forms for certain types of incomes, tax deductions, and tax credits.
If you are 65 or older, you can opt to use Form 1040-SR instead of the standard version of the tax version. The seniors' version is identical to the standard version but uses a bigger font and a simple language that seniors can understand. It is optional to use Form 1040-SR, and seniors can choose their preferred tax form between the two.
The IRS also provides Form 1040-NR for non-resident aliens. This tax form has the same structure as the standard Form 1040, but its information and additional tax forms are tailored for non-resident aliens filing federal income taxes in the United States.