You have a MFJ couple that has a combined AGI of $170,000 One spouse is covered by an employers retirement plan and doesn't contribute to a traditional IRA. The other spouse is not covered by a retirement plan and contributes $6000 to a traditional IRA. Does she get to take the $5000 credit and roll the additional $1000 over to a form 8606 or is there AGI together too much so she has to put the entire $6000 on form 8606? Please help and advise!

She doesn't get a credit but rather a deduction. In 2011 filing MFJ and for AGI between $170K and $179K where she is not covered by a retirement plan but he is, she gets to deduct a portion of the $6K - I figure $4500. The rest gets reported as a non-deductible IRA contribution on Form 8606. For reference see IRS Pub 560: http://www.irs.gov/pub/irs-pdf/p590.pdf

Actually the limit to be able to deduct the contribution is $109000 for married filing jointly if one of the spouses is covered by a retirement plan at work.