Hi, for 2013,
You can both contribute, but only your spouse can deduct
To frill down just a bit more ... heres the table entitled
If Your Filing Status Is...
$59,000 or less
a full deduction up to the amount of your contribution limit.
more than $59,000 but less than $69,000
a partial deduction.
$69,000 or more
$95,000 or less
more than $95,000 but less than $115,000
a partial deduction.
$115,000 or more
less than $10,000
$10,000 or more
An this one is entitled ...
$178,000 or less
more than $178,000 but less than $188,000
$188,000 or more
So you can see that since you are at 120000, you are over the DEDUCTION limit; $115,000
But for your wife, since the covered spouse is under 178,000, her contribution is full deductible
And, again the limit this year on AMOUNT contributed is 5,500 (6,500 if you are over age 50)
To recap, you can CONTRIBUTE 11,000 total (13,000, if you're both over 50) and the wife's IRA based on the information you provided would be fully deductible
One final piece here; Note that the income number that's used is MAGI (Modified Adjusted Gross Income), rather than Gross Income
To arrive at your modified AGI, start with your adjusted gross income and then add back the following items:
Note that you are not required to add back any contribution you made to an employer plan such as a 401k plan. If you are running up against the limit for modified AGI, one way to reduce that number is XXXXX make deductible contributions to an employer plan.
That should be everything
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