What is the maximum deductible IRA contribution allowable for an individual with a $25,000 annual income?

The correct answer is based on the contribution limits set by the IRS for Individual Retirement Accounts (IRAs). For tax year 2023, the maximum annual contribution limit for a traditional IRA is $6,000 for individuals under the age of 50. Additionally, those aged 50 or older can contribute an additional $1,000, bringing their total limit to $7,000.

With an annual income of $25,000, the individual is well below the income thresholds that influence deductible contributions for traditional IRAs. Therefore, this individual can take full advantage of the maximum contribution limit.

It is important to note that while there are specific income thresholds for determining the deductibility of contributions, an income of $25,000 typically allows for the full deductible amount. For those covered by a retirement plan at work, the deductibility may be phased out at higher income levels, but in this scenario, the income level does not disqualify the individual from making the full contribution. Thus, the maximum deductible IRA contribution allowable would indeed be $6,000.