Can the same earned income be used for Roth 401k and Roth IRA?

[qofmiwok]

Say eligible earned income is $10k, and $10k goes into a Roth 401k.  Can an additional $5k go into a Roth IRA?  Turbotax is allowing it but it seems wrong, although I can't find anything to indicate it is not allowed.

[Critter-3 · Accepted solution]

If the amount went into a ROTH 401K then that amount is still reported in box 1 of the W-2 form which means it is still taxable income and as such can be used for the ROTH  IRA contribution as well ... weird as it may seem it is allowed... one of those legal loopholes.   

[fanfare]

not so weird.

your 401k contribution does not reduce your IRA contribution.

only your MAGI will limit you.

Deductibility for a traditional IRA also depends on income.

[qofmiwok]

To me it's weird because you basically get to put money that has never been taxed into a Roth retirement account which never will get taxed.

[fanfare]

@qofmiwok 

Roth contributions are not deductible, You pay income tax on that .

[qofmiwok]

Not if you can use the same earned income for both a Roth 401k and a Roth IRA.

ie My original question was, you have $10k earned income which you put into a Roth 401k, then you put another $7k into a Roth IRA.  That just gave you $17k of tax free Roth accounts on $10k earned income.  Meaning you never pay tax on the $7k.

[Critter-3]

Again a legal loophole that most folks would never see ... few people put all their wages into a retirement account and an IRA in the same tax year.  So as strange as it seems it is legal. 

[macuser_22]

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@qofmiwok wrote:

Not if you can use the same earned income for both a Roth 401k and a Roth IRA.

ie My original question was, you have $10k earned income which you put into a Roth 401k, then you put another $7k into a Roth IRA.  That just gave you $17k of tax free Roth accounts on $10k earned income.  Meaning you never pay tax on the $7k.

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The money that goes into a Roth 401(k) *is* taxed.  Only after-tax money can go into a Roth.    Before tax money will not be in box 1 on a W-2 - it will only be in box 12 code D for  non-Roth 401(k). Roth will have code AA.

[fanfare]

@qofmiwok 

your money can't be in two places at once.

If you took the 7k out of your wallet, then you already paid tax on that if it was income.