Wow, this is probably a really great answer to my question as well. Could I make an example to see if I understand?
Let's say my spouse makes $20K net income after self employment taxes, etc. Say our total income including capital gains is $200K and neither she or I have any other job in 2023. So our medical insurance premiums, covered partially under the Affordable Care Act would be roughly $16K.
In previous years, when I was employed with health care coverage, I would put my spouse's entire $20K income into her individual 401k (traditional) at Vanguard to reduce my current taxes. Now that I'm unemployed, can I:
1. Deduct the $16K insurance premium (Turbotax puts on Schedule 1 Line 17)?
2. Also contribute $16K to my spouse's 401k with a "new" Roth designation (Turbotax puts on Schedule 1 Line 16)?
3. Also contribute the remaining $4K to her individual 401k or some other traditional account?
I just wanted to confirm this is what you are saying... 1. & 2. are allowed to do double duty for some reason, and therefore my spouse will get the benefit of no more taxes ever on the $16K Roth contribution. For 3., would the $4K need to go into an IRA because the 401k won't accept contributions of both types in the same year?
Also, when I first entered everything, I just did like I have always done... I entered my spouse's 401k contribution as being traditional. Then on Turbotax schedule 1 I got both a $16K deduction for health insurance and a $20K deduction for the 401k. Is this acceptable? Would the IRS say this is not cool to take both deductions from the same $20K income and disallow one or the other?
Thank you for the help! It is very appreciated!!!
