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posted Jun 4, 2019 1:30:04 PM

IRA contribution and how much it will lower my taxes

My husband and I are married filing jointly in the 33% tax bracket. We owe over $6,000 currently and are trying to figure out how much our taxes can be lowered if we each contribute $5,500 to an IRA before April 18th. One of us has a 401k set up and the other does not.

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Alumni
Jun 4, 2019 1:30:05 PM

If you are in the 33% marginal tax rate bracket, it is very unlikely that you could make a deductible contribution to a Traditional IRA, and that is the only thing that would reduce your tax. Contributions to a ROTH IRA or non-deductible contributions to a Traditional IRA have no effect on your tax.
You should carefully read the limits on IRA deductions in IRS Pub. 590-A at this link:
http://www.irs.gov/pub/irs-pdf/p590a.pdf

If you are able to make a deductible contribution to a Traditional IRA, then the contribution reduces your tax by the amount of the contribution times your marginal tax rate bracket. So a $1,000 contribution would reduce your tax by  $330.