The U.S. tax-advantaged retirement account rules are almost bizarrely complex. Therefore, we have fully automated these tax rules in our VeriPlan lifetime financial planning model. For more information on IRA tax rules see the 104 page IRS Publication 590.

To clarify, this modeling scenario assumes that neither Fran nor Fred are covered by a qualified retirement plan at work. This is the case with many millions of workers. With no qualified retirement plan, there is no limitation on the deductibility of contributions into an IRA.

To summarize the remaining situations, which are not modeled in this scenario:

1) If both are covered by a qualified plan at work, then deductibility phaseout begins at $80,000 and is completely phased out at $100,000. (Phase-out is linear.)

2) If you are NOT covered by a qualified retirement plan at work, but your spouse IS, then your IRA contribution deduction would be phased out starting at $150,000 of combined income with the phaseout complete at $160,000.

3) If you are COVERED by a qualified retirement plan at work, but your spouse IS NOT, then your IRA contribution deduction would be phased out starting at $80,000 of combined income with the phaseout complete at $100,000.

Is this complex enough for you?

For your convenience, The Skilled Investor has provided a detailed table that summarizes 2007 rules for traditional IRAs and Roth IRAs.

Because this table has 13 columns and 20 rows, it is too large to be displayed properly in a blog posting. To view this table and read the accompanying article, follow this link to The Skilled Investor’s main website:

Summary Table of Traditional IRA and Roth IRA Tax Rules

For more of The Skilled Investor’s commentary on the complexity of US retirement account tax laws, see: “Commentary — the labyrinth of tax-advantaged plan rules.”