For singles and joint filers in which neither spouse is a qualified plan participant, deductible contributions are allowed regardless of how high MAGI may be.

Single plan participants with MAGI at $60,999 or less in 2016 can take a full deduction for their contribution. Joint filers start a phase-out of deductibility at $98,000 if both spouses are plan participants. However, if one spouse is not a plan participant, that uncovered spouse can make a full deductible contribution if MAGI is $183,999 or less, even if the uncovered spouse doesn’t work.

Higher income households often cannot contribute and deduct the contribution from their gross income. Does that mean they shouldn’t?

My professor’s illustration represents a fair argument as to why someone should consider non-deductible contributions. Clients that contribute will accumulate more money than those that don’t contribute (duh!) or those that opt to keep contributions in a taxable account. Whether they eventually keep more of the accumulation in the IRA depends on how they invest the accounts, how much comes out of the accounts, when those distributions are made and what else is on the 1040 in the year of those distributions.

The case for a non-deductible contribution is most compelling when a path to a Roth IRA is evident. Done right, distributions from Roth IRAs are tax-free and thus erase much of the just- mentioned uncertainty of using a taxable account.

The most commonly discussed path is the so-called “back door Roth”. This does not work well if the taxpayer has other IRA accounts due to the notorious pro-rata rule.

“I don’t want another account.” For years, if you wanted to preserve the ability to rollover IRA funds that came from one qualified plan into another qualified plan, you had to keep the assets in that rollover IRA segregated from all other accounts.

The rules are different now. All of a taxpayer’s IRAs are considered one IRA. Good reasons exist to have multiple IRAs, but the old rules are not one of them.

In many cases, combining IRA accounts will save fees, make it easier to rebalance and otherwise manage the accounts. Sometimes we hear that different accounts are maintained because one of them is a “nondeductible IRA.”

“What’s an 8606?” I haven’t read every word of it but to my knowledge there is no such thing in the actual tax code called a “nondeductible IRA”. IRAs are either traditional or Roth. It is the contribution to the IRA that is non-deductible.