3629. What nondeductible contributions may be made to a traditional IRA?Nuco EmployeeCarly Brooks202016-07-05T18:55:00Z2016-07-05T18:55:00Z13832185Hewlett-Packard185256314Site Map/Individual Retirement Plans/Traditional IRA/Contributionsindividual retirement account annuity2005-01-25T00:00:00ZTaxFactsDefaultArticle114730220-00-tf1.xml221.00;#1817;#0x010100C568DB52D9D0A14D9B2FDCC96666E9F2007948130EC3DB064584E219954237AF3900242457EFB8B24247815D688C526CD44D009C4E67E972694125ABDA91AC61F5E51FTax Facts 1How much may an individual contribute to a traditional IRA? How much may he deduct?58200.0000000000TaxFactsDefaultArticle2010-01-19T08:10:11ZSBMEDIA\moss-admin0f08e536-ecc3-4201-b7c3-d3285df31d4d|f4a99f14-70d1-4322-89d4-6abb9d2ff0f8|e61e1fe0-4cd8-4f03-a422-aa30e17bd50a3629. What nondeductible contributions may be made to a traditional IRA?Nondeductible contributions can also be made to a traditional IRA. The limit on nondeductible contributions is equal to the excess of the “deductible amount,” discussed in Q 3628, over the actual maximum deduction allowed..IRC Sec. 408(o)(2)(B)(i). Contributions made to Roth IRAs for the taxable year reduce this limit (Q 3630). This limit is not reduced because an individual’s AGI exceeds certain limits (in contrast, see Q 3630 with respect to contributions to Roth IRAs). A taxpayer may elect to treat contributions that would otherwise be deductible as nondeductible..IRC Sec. 408(o)(2)(B)(ii).. Nondeductible contributions must be reported on the individual’s tax return and penalties apply if the required form is not filed or the amount of such contributions is overstated (Q 3667).Planning Point: It is generally better to make nondeductible contributions to a Roth IRA (Q 3630) rather than nondeductible contributions to a traditional IRA.Endowment ContractsEndowment contracts issued after November 6, 1978 do not qualify as individual retirement annuities; therefore, contributions to such contracts are not deductible..See Treas. Reg. §§1.408-4(f), 1.408-3(e)(1)(ix). Furthermore, in the case of contributions to an endowment contract individual retirement annuity issued before November 7, 1978, no deduction is allowed for contributions that are allocable to the purchase of life insurance protection. The amount allocable to life insurance protection is determined by multiplying the death benefit payable during the tax year less the cash value at the end of the year by the net premium cost. (See Q 586 for purposes of valuing the economic benefit of current life insurance protection.). The nondeductible amount may be contributed to another funding medium and a deduction taken so that the maximum deduction may be used, but it may not be used to pay the premium for an annuity if the total premium on behalf of any one individual would then exceed the maximum annual contribution limit.