Financial Advice Q&A

New Member
Posts: 1
My IRA contribution is not deductible, can I undo it?
[ Edited ]

I recently made a $5000 contribution to my traditional USAA IRA for this tax year. Our tax preparer said it was not deductible due to our income level. She said I could put it into a ROTH and it would be deductible. We had been considering opening a ROTH for my wife with USAA. Would it be possible to open the account and have the $5000 transferred into my wife's new account without any penalty?

Posted: 2014-03-19 10:35 AM
Other Answers: 1
Community Manager
Posts: 398

Hmmmmm...are you sure that's what your tax preparer told you?  I'm thinking you may have misunderstood.  If she did tell you that, it may be time to have someone else take a look at your return. Let's take a quick look at some pertinent points. 


Roth IRA

First off, a contribution to a Roth IRA is NEVER deductible. It will not help reduce your taxable income like a deductible contribution to a traditional IRA would.  A contribution to a Roth IRA might allow you to qualify for a special Saver's Credit  if your income is less than certain IRS thresholds, but it's not deductible.


In order to contribute to a Roth IRA for 2013, you have to be within IRS income limits.  For a couple filing jointly, your modified adjusted gross income needs to be below $178,000 to make a full Roth IRA contribution ($112,000 single). To learn more about the world of IRAs and everything I'll discuss here check out IRS Publication 590.     


Traditional IRA deduction

The rules for deducting your traditional IRA contribution are also contained in Publication 590.  Your ability to deduct is based on your income and whether you or your spouse is covered by a retirement plan at work.  Check out the FAQ on deducting your IRA contribution at to walk through the details of your specific situation. For example, if you file jointly and are covered by a plan at work, your traditional IRA contribution is only fully deductible if your modified adjusted gross income is less than $95,000.  


Between the IRS provided information and your tax preparer's input you should be able to work out whether you're eligible to make a Roth IRA contribution and whether or not you could deduct a traditional IRA contribution.


Undoing your IRA contribution


While you won't be able to transfer your IRA contribution directly to a Roth IRA for your wife, you can work with our folks to undo your 2013 traditional IRA contribution and then use that money to fund a Roth for your wife. You can reach them at 800-771-9960.  USAA will determine if there were earnings on the contribution and if that's the case those earnings will be taxable and could be subject to an additional 10% penalty if you're not 59 1/2.  You better get on this quick though, because the deadline for a 2013 Roth IRA contribution is April 15, 2014.


I hope I've answered your question and wish you the best!



Posted: 2014-03-20 09:36 AM


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