[Code of Federal Regulations]
[Title 26, Volume 1]
[Revised as of April 1, 2004]
From the U.S. Government Printing Office via GPO Access
[CITE: 26CFR1.219-1]

[Page 380-382]
 
                       TITLE 26--INTERNAL REVENUE
 
    CHAPTER I--INTERNAL REVENUE SERVICE, DEPARTMENT OF THE TREASURY 
                               (CONTINUED)
 
PART 1_INCOME TAXES--Table of Contents
 
Sec. 1.219-1  Deduction for retirement savings.

    (a) In general. Subject to the limitations and restrictions of 
paragraph (b) and the special rules of paragraph (c)(3) of this section, 
there shall be allowed a deduction under section 62 from gross income of 
amounts paid for the taxable

[[Page 381]]

year of an individual on behalf of such individual to an individual 
retirement account described in section 408(a), for an individual 
retirement annuity described in section 408(b), or for a retirement bond 
described in section 409. The deduction described in the preceding 
sentence shall be allowed only to the individual on whose behalf such 
individual retirement account, individual retirement annuity, or 
retirement bond is maintained. The first sentence of this paragraph 
shall apply only in the case of a contribution of cash. A contribution 
of property other than cash is not allowable as a deduction under this 
section. In the case of a retirement bond, a deduction will not be 
allowed if the bond is redeemed within 12 months of its issue date.
    (b) Limitations and restrictions--(1) Maximum deduction. The amount 
allowable as a deduction under section 219(a) to an individual for any 
taxable year cannot exceed an amount equal to 15 percent of the 
compensation includible in the gross income of the individual for such 
taxable year, or $1,500, whichever is less.
    (2) Restrictions--(i) Individuals covered by certain other plans. No 
deduction is allowable under section 219(a) to an individual for the 
taxable year if for any part of such year:
    (A) He was an active participant in:
    (1) A plan described in section 401(a) which includes a trust exempt 
from tax under section 501(a),
    (2) An annuity plan described in section 403(a),
    (3) A qualified bond purchase plan described in section 405(a), or
    (4) A retirement plan established for its employees by the United 
States, by a State or political subdivision thereof, or by an agency or 
instrumentality of any of the foregoing, or
    (B) Amounts were contributed by his employer for an annuity contract 
described in section 403(b) (whether or not the individual's rights in 
such contract are nonforfeitable).
    (ii) Contributions after age 70\1/2\. No deduction is allowable 
under section 219 (a) to an individual for the taxable year of the 
individual, if he has attained the age of 70\1/2\ before the close of 
such taxable year.
    (iii) Rollover contributions. No deduction is allowable under 
section 219 for any taxable year of an individual with respect to a 
rollover contribution described in section 402(a)(5), 402(a)(7), 
403(a)(4), 403(b)(8), 408(d)(3), or 409(b)(3)(C).
    (3) Amounts contributed under endowment contracts. (i) For any 
taxable year, no deduction is allowable under section 219(a) for amounts 
paid under an endowment contract described in Sec. 1.408-3(e) which is 
allocable under subdivision (ii) of this subparagraph to the cost of 
life insurance.
    (ii) For any taxable year, the cost of current life insurance 
protection under an endowment contract described in paragraph (b)(3)(i) 
of this section is the product of the net premium cost, as determined by 
the Commissioner, and the excess, if any, of the death benefit payable 
under the contract during the policy year beginning in the taxable year 
over the cash value of the contract at the end of such policy year.
    (iii) The provisions of this subparagraph may be illustrated by the 
following examples:

    Example 1. A, an individual who is otherwise entitled to the maximum 
deduction allowed under section 219, purchases, at age 20, an endowment 
contract described in Sec. 1.408-3(e) which provides for the payment of 
an annuity of $100 per month, at age 65, with a minimum death benefit of 
$10,000, and an annual premium of $220. The cash value at the end of the 
first policy year is 0. The net premium cost, as determined by the 
Commissioner, for A's age is $1.61 per thousand dollars of life 
insurance protection. The cost of current life insurance protection is 
$16.10 ($1.61 x 10). A's maximum deduction under section 219 with 
respect to amounts paid under the endowment contract for the taxable 
year in which the first policy year begins is $203.90 ($220 - $16.10).
    Example 2. Assume the same facts as in Example 1, except that the 
cash value at the end of the second policy year is $200 and the net 
premium cost is $1.67 per thousand for A's age. The cost of current life 
insurance protection is $16.37 ($1.67 x 9.8). A's maximum deduction 
under section 219 with respect to amounts paid under the endowment 
contract for the taxable year in which the second policy year begins is 
$203.63 ($220 - $16.37).

    (c) Definitions and special rules--(1) Compensation. For purposes of 
this section, the term compensation means wages, salaries, professional 
fees, or

[[Page 382]]

other amounts derived from or received for personal service actually 
rendered (including, but not limited to, commissions paid salesmen, 
compensation for services on the basis of a percentage of profits, 
commissions on insurance premiums, tips, and bonuses) and includes 
earned income, as defined in section 401 (c) (2), but does not include 
amounts derived from or received as earnings or profits from property 
(including, but not limited to, interest and dividends) or amounts not 
includible in gross income.
    (2) Active participant. For the definition of active participant, 
see Sec. 1.219-2.
    (3) Special rules. (i) The maximum deduction allowable under section 
219(b)(1) is computed separately for each individual. Thus, if a husband 
and wife each has compensation of $10,000 for the taxable year and they 
are each otherwise eligible to contribute to an individual retirement 
account and they file a joint return, then the maximum amount allowable 
as a deduction under section 219 is $3,000, the sum of the individual 
maximums of $1,500. However, if, for example, the husband has 
compensation of $20,000, the wife has no compensation, each is otherwise 
eligible to contribute to an individual retirement account for the 
taxable year, and they file a joint return, the maximum amount allowable 
as a deduction under section 219 is $1,500.
    (ii) Section 219 is to be applied without regard to any community 
property laws. Thus, if, for example, a husband and wife, who are 
otherwise eligible to contribute to an individual retirement account, 
live in a community property jurisdiction and the husband alone has 
compensation of $20,000 for the taxable year, then the maximum amount 
allowable as a deduction under section 219 is $1,500.
    (4) Employer contributions. For purposes of this chapter, any amount 
paid by an employer to an individual retirement account or for an 
individual retirement annuity or retirement bond constitutes the 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, whether or not a deduction for such payment is 
allowable under section 219 to such employee after the application of 
section 219(b). Thus, an employer will be entitled to a deduction for 
compensation paid to an employee for amounts the employer contributes on 
the employee's behalf to an individual retirement account, for an 
individual retirement annuity, or for a retirement bond if such 
deduction is otherwise allowable under section 162.

[T.D. 7714, 45 FR 52788, Aug. 8, 1980]