§ 219. Retirement savings
(a)
Allowance of deduction
In the case of an individual, there shall be allowed as a deduction an amount equal to the qualified retirement contributions of the individual for the taxable year.
(b)
Maximum amount of deduction
(1)
In general
The amount allowable as a deduction under subsection (a) to any individual for any taxable year shall not exceed the lesser of—
(2)
Special rule for employer contributions under simplified employee pensions
This section shall not apply with respect to an employer contribution to a simplified employee pension.
(3)
Plans under section
501
(c)(18)
(5)
Deductible amount
For purposes of paragraph (1)(A)—
(A)
In general
The deductible amount shall be determined in accordance with the following table:
For taxable years
The deductible
beginning in:
amount is:
2002 through 2004
$3,000
2005 through 2007
$4,000
2008 and thereafter
$5,000.
(B)
Catch-up contributions for individuals 50 or older
(C)
Catchup contributions for certain individuals
(i)
In general
In the case of an applicable individual who elects to make a qualified retirement contribution in addition to the deductible amount determined under subparagraph (A)—
(ii)
Applicable individual
For purposes of this subparagraph, the term “applicable individual” means, with respect to any taxable year, any individual who was a qualified participant in a qualified cash or deferred arrangement (as defined in section 401(k)) of an employer described in clause (iii) under which the employer matched at least 50 percent of the employee’s contributions to such arrangement with stock of such employer.
(iii)
Employer described
An employer is described in this clause if, in any taxable year preceding the taxable year described in clause (ii)—
(c)
Special rules for certain married individuals
(1)
In general
In the case of an individual to whom this paragraph applies for the taxable year, the limitation of paragraph (1) of subsection (b) shall be equal to the lesser of—
(B)
the sum of—
(ii)
the compensation includible in the gross income of such individual’s spouse for the taxable year reduced by—
(II)
the amount of any designated nondeductible contribution (as defined in section
408
(o)) on behalf of such spouse for such taxable year, and
(III)
the amount of any contribution on behalf of such spouse to a Roth IRA under section
408A for such taxable year.
(d)
Other limitations and restrictions
(1)
Beneficiary must be under age 701/2
No deduction shall be allowed under this section with respect to any qualified retirement contribution for the benefit of an individual if such individual has attained age 701/2 before the close of such individual’s taxable year for which the contribution was made.
(4)
Denial of deduction for amount contributed to inherited annuities or accounts
No deduction shall be allowed under this section with respect to any amount paid to an inherited individual retirement account or individual retirement annuity (within the meaning of section
408
(d)(3)(C)(ii)).
(e)
Qualified retirement contribution
For purposes of this section, the term “qualified retirement contribution” means—
(f)
Other definitions and special rules
(1)
Compensation
For purposes of this section, the term “compensation” includes earned income (as defined in section
401
(c)(2)). The term “compensation” does not include any amount received as a pension or annuity and does not include any amount received as deferred compensation. The term “compensation” shall include any amount includible in the individual’s gross income under section
71 with respect to a divorce or separation instrument described in subparagraph (A) of section
71
(b)(2). For purposes of this paragraph, section
401
(c)(2) shall be applied as if the term trade or business for purposes of section
1402 included service described in subsection (c)(6). The term compensation [1] includes any differential wage payment (as defined in section
3401
(h)(2)).
(2)
Married individuals
The maximum deduction under subsection (b) shall be computed separately for each individual, and this section shall be applied without regard to any community property laws.
(3)
Time when contributions deemed made
For purposes of this section, a taxpayer shall be deemed to have made a contribution to an individual retirement plan on the last day of the preceding taxable year if the contribution is made on account of such taxable year and is made not later than the time prescribed by law for filing the return for such taxable year (not including extensions thereof).
(4)
Reports
The Secretary shall prescribe regulations which prescribe the time and the manner in which reports to the Secretary and plan participants shall be made by the plan administrator of a qualified employer or government plan receiving qualified voluntary employee contributions.
(5)
Employer payments
For purposes of this title, any amount paid by an employer to an individual retirement plan shall be treated as payment of compensation to the employee (other than a self-employed individual who is an employee within the meaning of section
401
(c)(1)) includible in his gross income in the taxable year for which the amount was contributed, whether or not a deduction for such payment is allowable under this section to the employee.
(6)
Excess contributions treated as contribution made during subsequent year for which there is an unused limitation
(A)
In general
If for the taxable year the maximum amount allowable as a deduction under this section for contributions to an individual retirement plan exceeds the amount contributed, then the taxpayer shall be treated as having made an additional contribution for the taxable year in an amount equal to the lesser of—
(C)
Special rule where excess deduction was allowed for closed year
Proper reduction shall be made in the amount allowable as a deduction by reason of this paragraph for any amount allowed as a deduction under this section for a prior taxable year for which the period for assessing deficiency has expired if the amount so allowed exceeds the amount which should have been allowed for such prior taxable year.
(7)
Special rule for compensation earned by members of the Armed Forces for service in a combat zone.
For purposes of subsections (b)(1)(B) and (c), the amount of compensation includible in an individual’s gross income shall be determined without regard to section
112.
(8)
Election not to deduct contributions
For election not to deduct contributions to individual retirement plans, see section
408(o)(2)(B)(ii).
(g)
Limitation on deduction for active participants in certain pension plans
(1)
In general
If (for any part of any plan year ending with or within a taxable year) an individual or the individual’s spouse is an active participant, each of the dollar limitations contained in subsections (b)(1)(A) and (c)(1)(A) for such taxable year shall be reduced (but not below zero) by the amount determined under paragraph (2).
(2)
Amount of reduction
(A)
In general
The amount determined under this paragraph with respect to any dollar limitation shall be the amount which bears the same ratio to such limitation as—
(3)
Adjusted gross income; applicable dollar amount
For purposes of this subsection—
(B)
Applicable dollar amount
The term “applicable dollar amount” means the following:
(i)
In the case of a taxpayer filing a joint return:
The
applicable
For taxable years beginning in:
dollar amount
is:
1998
$50,000
1999
$51,000
2000
$52,000
2001
$53,000
2002
$54,000
2003
$60,000
2004
$65,000
2005
$70,000
2006
$75,000
2007 and thereafter
$80,000.
(4)
Special rule for married individuals filing separately and living apart
A husband and wife who—
shall not be treated as married individuals for purposes of this subsection.
(5)
Active participant
For purposes of this subsection, the term “active participant” means, with respect to any plan year, an individual—
(A)
who is an active participant in—
(i)
a plan described in section
401
(a) which includes a trust exempt from tax under section
501
(a),
The determination of whether an individual is an active participant shall be made without regard to whether or not such individual’s rights under a plan, trust, or contract are nonforfeitable. An eligible deferred compensation plan (within the meaning of section
457
(b)) shall not be treated as a plan described in subparagraph (A)(iii).
(6)
Certain individuals not treated as active participants
For purposes of this subsection, any individual described in any of the following subparagraphs shall not be treated as an active participant for any taxable year solely because of any participation so described:
(A)
Members of reserve components
Participation in a plan described in subparagraph (A)(iii) of paragraph (5) by reason of service as a member of a reserve component of the Armed Forces (as defined in section
10101 of title
10), unless such individual has served in excess of 90 days on active duty (other than active duty for training) during the year.
(7)
Special rule for spouses who are not active participants
If this subsection applies to an individual for any taxable year solely because their spouse is an active participant, then, in applying this subsection to the individual (but not their spouse)—
(8)
Inflation adjustment
In the case of any taxable year beginning in a calendar year after 2006, the dollar amount in the last row of the table contained in paragraph (3)(B)(i), the dollar amount in the last row of the table contained in paragraph (3)(B)(ii), and the dollar amount contained in paragraph (7)(A), shall each be increased by an amount equal to—
(B)
the cost-of-living adjustment determined under section
1
(f)(3) for the calendar year in which the taxable year begins, determined by substituting “calendar year 2005” for “calendar year 1992” in subparagraph (B) thereof.
Any increase determined under the preceding sentence shall be rounded to the nearest multiple of $1,000.
[1] So in original. Probably should be set off by quotation marks.