Back to Work After Retirement, is it Possible to Deduct IRA Contributions? Howard Hook, CFP®, CPA, Quoted in The Star-Ledger's finance/business column, "Biz Brain," December 23, 2013 Question: My husband retired on May 1, 2013. Prior to that time, he was enrolled in a pension plan to which and his employer both contributed. After a few months of retirement, he returned to work. He would like to contribute to an IRA. I've heard that if you are covered by a retirement plan at work and have a modified AGI of $69,000 or more, you cannot take a deduction. Does the fact that he participated in his pension plan for only four months allow for a partial deduction? His income will exceed $69,000. -- Trying to plan Answer: You're very sharp to ask this question. It goes to show that even if think you can't take a tax deduction for an IRA contribution, there can still be some great IRA planning opportunities for you. For starters, even though your husband participated in his pension plan for four months, the rules don't allow for a partial deduction because your income will exceed $69,000, said Howard Hook, a certified financial planner and certified public accountant with EKS Associates in Princeton. He cites IRS Publication 590, which says: "If you or your spouse was covered by an employer retirement plan at any time during the year for which contributions were made, your deduction may be further limited." As to what that limitation is based on, Publication 590 says: "If either you or your spouse was covered by an employer retirement plan, you may be entitled to only a partial (reduced) deduction or no deduction at all, depending on your income and your filing status." Hook says the income limitation for people filing a joint tax return starts at $95,000 and phases out fully at $115,000 -- for those where both spouses contribute to an employer retirement plan. "These amounts are greater than the $69,000 you mentioned in your question," he said. If the spouse not covered by a plan wants to take a tax deduction, then the income limits are $178,000 and phased out completely at $188,000, Hook said. If both of you are covered by a retirement plan at work, then the income limitation for taking a tax deduction starts at $95,000 and phases out fully at $115,000. "Although your husband is covered under a retirement plan at work in 2013, if you are not covered, then you could take a full tax deduction for an IRA contribution for yourself as long as your modified adjusted gross income is less than $173,000, and a partial deduction from $173,001 to $183,000." Additionally, you should remember that a spouse does not need earned income to be able to make a tax deductible contribution, as long as the other spouse has earned income. That means a married couple where one spouse earns $100,000 and the other spouse earns nothing can still each make IRA contributions.