Retirement Plan Contribution Deductions (LO. 9) In 2019, Kathy, who is single and 25, inherited $7,000 from her grandmother. A coworker has suggested that Kathy open an individual retirement account with the $7,000. Her friend says that an IRA is a great way to save because you don't have to pay tax on the income from the investment and you get a tax deduction for your contribution. Complete the letter below outlining for Kathy various individual retirement accounts available. Dear Kathy, I would like to outline both the accurate and inaccurate information you received from your friend and, in instances where the advice was inaccurate, provide you with the correct tax treatment. I hope to explain how different facts may lead to different tax treatments. First, your co-worker's statement that an IRA is an excellent vehicle to save is correct and the income does accumulate tax-free. The information concerning the amount you can contribute and any associated tax deduction requires clarification. First, you are only allowed to contribute up to $ 6,000 per year. Assuming that you are not covered by an employer provided retirement plan, you can deduct the entire contribution amount not to exceed $ 6,000 If you are covered by an employer-provided retirement plan, your deduction is phased-out over a $ 10,000 range beginning when your adjusted gross income exceeds $ Basically, in 2019, when adjusted gross income exceeds $ the tax benefit is lost If you are covered by a qualified employer-sponsored pension plan and your adjusted gross income exceeds , you could make a $ nondeductible contribution to a Roth IRA. A contribution to a Roth IRA can be made if your adjusted gross income does not exceed $ . If your adjusted gross income exceeds this amount, your contribution is phased out ratably until no contribution is allowed when adjusted gross income equals