Sign Up

Why sign in to the Community?

  • Submit a question
  • Check your notifications
or and start working on your taxes
cancel
Showing results for 
Search instead for 
Did you mean: 
SeaVik
Level 1

Can I make a deductible IRA contribution? I am doing consulting gigs in 2021. I had a 401k for a month only with one gig. Gross Income will be about $150k.

I've read that if I have a 401k, I wouldn't qualify because my income is above the $70-80k limit. However, I only had a 401k for a few weeks before that gig ended (with a contribution of $750). So technically I had a 401k, but am not able to contribute to it anymore, so want to make a deductible contribution to an IRA instead.
8 Replies
Critter-3
Level 15

Can I make a deductible IRA contribution? I am doing consulting gigs in 2021. I had a 401k for a month only with one gig. Gross Income will be about $150k.

Since you had a 401K anytime in 2021 then even that you can make a full IRA contribution the amount you can deduct on the return MAY  be limited.  

 

See these IRS IRA deduction limit charts.

If *you* are covered by a retirement plan:
https://www.irs.gov/Retirement-Plans/2015-IRA-Deduction-Limits-Effect-of-Modified-AGI-on-Deduction-i...

If you are *not* covered but your spouse is:
https://www.irs.gov/Retirement-Plans/2015-IRA-Deduction-Limits-Effect-of-Modified-AGI-on-Deduction-i...

Opus 17
Level 15

Can I make a deductible IRA contribution? I am doing consulting gigs in 2021. I had a 401k for a month only with one gig. Gross Income will be about $150k.

No, sorry.

 

However, you can open a solo 401(k) as a small business person (your schedule C consulting job).

https://www.irs.gov/retirement-plans/retirement-plans-for-self-employed-people

 

(Note that you can't have a "gig" with a 401(k).  You would have to be a W-2 employee.  You might have left that job to work on your own, which is fine.  As an independent contractor, you can't be part of some other employer's 401(k) plan because that is only for employees which you would not have been.  But you can open your own 401(k). )

*Answers are correct to the best of my ability at the time of posting but do not constitute legal or tax advice.*
fanfare
Level 15

Can I make a deductible IRA contribution? I am doing consulting gigs in 2021. I had a 401k for a month only with one gig. Gross Income will be about $150k.

" the amount you can deduct on the return will be limited.  "

 

The amount you can deduct may be limited.

It depends on what your income is.

 

If you don't want to track a basis for the rest of your life or the life of the IRA, don't contribute more than the deductible amount allowed.

Opus 17
Level 15

Can I make a deductible IRA contribution? I am doing consulting gigs in 2021. I had a 401k for a month only with one gig. Gross Income will be about $150k.

Given the income the taxpayer reports, a deductible IRA is disallowed.  The Taxpayer can contribute to a Roth IRA or open a solo (self-employed) 401k.  

*Answers are correct to the best of my ability at the time of posting but do not constitute legal or tax advice.*
SeaVik
Level 1

Can I make a deductible IRA contribution? I am doing consulting gigs in 2021. I had a 401k for a month only with one gig. Gross Income will be about $150k.

Thanks!

 

I’m not an independent contractor, I go through a middle-man (company) from gig to gig and am a W2 employee of the middle-man, which can change with each project. On one project, the middle-man provided a 401k. On my current project, they don’t. Not that this changes anything.

 

It sounds like maybe I should just put the money I would have put in a 401k into my Roth IRA? Does that have a limit?

VolvoGirl
Level 15

Can I make a deductible IRA contribution? I am doing consulting gigs in 2021. I had a 401k for a month only with one gig. Gross Income will be about $150k.

That is confusing.   You get a W2?  Do you get 1 W2 for all the jobs?  Or a W2 for each gig?  You must get different W2s if one of them provides a 401K.

DoninGA
Level 15

Can I make a deductible IRA contribution? I am doing consulting gigs in 2021. I had a 401k for a month only with one gig. Gross Income will be about $150k.


@SeaVik wrote:

Thanks!

 

I’m not an independent contractor, I go through a middle-man (company) from gig to gig and am a W2 employee of the middle-man, which can change with each project. On one project, the middle-man provided a 401k. On my current project, they don’t. Not that this changes anything.

 

It sounds like maybe I should just put the money I would have put in a 401k into my Roth IRA? Does that have a limit?


IRA contribution limit for tax year 2020 is $6,000 if under age 50.  If age 50 or older it is $7,000

Go to this IRS website for the amount of contributions you can make on a Roth IRA in 2020 - https://www.irs.gov/retirement-plans/plan-participant-employee/amount-of-roth-ira-contributions-that...

Opus 17
Level 15

Can I make a deductible IRA contribution? I am doing consulting gigs in 2021. I had a 401k for a month only with one gig. Gross Income will be about $150k.

@SeaVik 

If you are a W-2 employee, then your options are limited. You can contribute to a Roth IRA, with a maximum of $6000 per year, or $7000 if you are over age 50, being aware of the income limit.

https://www.irs.gov/retirement-plans/amount-of-roth-ira-contributions-that-you-can-make-for-2021

 

A Roth IRA is not an immediate tax deduction, but it may have significant long-term advantages.

 

You can also make a non-deductible contribution to a traditional IRA, and then roll it over to a Roth IRA. This is called a “back door conversion”, but it is an advanced maneuver and I don’t want to even try to explain the complexities.  As long as your income is within the limit to make Roth IRA contributions, that would be the way to go in my opinion.  

Your Roth IRA is separate from the 401(k), and contributions to one do not affect the limit of contributions to the other.

*Answers are correct to the best of my ability at the time of posting but do not constitute legal or tax advice.*
Dynamic AdsDynamic Ads
Privacy Settings
v