How to Make Deductible Contributions to a Rollover IRA

Deductible IRA contributions are reported on either Form 1040 or 1040A.

Deductible IRA contributions are reported on either Form 1040 or 1040A.

A rollover individual retirement account (IRA) isn't a specific type of IRA. Instead, it just refers to an IRA that you have rolled money into from another qualified retirement plan, such as a 401(k) or 403(b). The contribution deduction rules for your rollover IRA depend on whether it's a traditional IRA or a Roth IRA. If it's a Roth, you're out of luck because your contributions are never deductible — but you do get tax-free qualified distributions. With a traditional rollover IRA, you can make contributions as long as you're under 70 1/2 and have compensation during the year. The contributions are always deductible if both you and your spouse aren't covered by an employer retirement plan. If you are covered, you can still deduct the contributions if your modified adjusted gross income falls below the annual limits for your filing status.

Compare your modified adjusted gross income to the limits for your filing status to determine whether or not you can deduct your traditional IRA contribution if you or your spouse is covered by an employer plan. For example, in 2012, if only your spouse is covered and you file a joint return, you can deduct your entire contribution, up to the annual contribution limit, if your modified adjusted gross income falls below $173,000.

Contribute to your traditional rollover IRA by your tax filing deadline, not including extensions. If you're making the contribution after the end of the calendar year, tell your financial institution to count the contribution for the prior year. Otherwise, it may count for the current year. For example, if you make your 2013 tax year contribution in February 2014, you need to specify that it's for the 2013 tax year.

Report the contribution on your taxes with either Form 1040 or Form 1040A. On Form 1040, the deduction goes on line 32. If you use Form 1040A, it goes on line 17.

Tip

  • As of 2012, you can contribute up to $5,000 per year to an IRA. If you're 50 or older, the limit increases to $6,000. However, these are subject to change in future years, so check IRS Publication 590 for the updated limits.

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