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Level 1

My wife work offers a retirement plan but she elected not to participate can we still deduct personal IRA contributions and not be subject to the 401k restrictions?

I just want to clear that the simple fact that her job "offers" the plan already triggers the restriction over our IRA contributions independently if there is participation or not in the actual 401k plan. matter of fact, we/she has no contributions to the 401K in 2018. can we then proceed and deduct the IRA contributions? our AGI is too high and will not let us do the deduction if we were covered by a 401K

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Level 7

My wife work offers a retirement plan but she elected not to participate can we still deduct personal IRA contributions and not be subject to the 401k restrictions?

If the box is marked retirement plan at work on her W-2 you will be restricted due to income limitations of having a Plan at work, even if she chooses not to participate.

You’re covered by an employer retirement plan for a tax year if your employer (or your spouse’s employer) has a:

  • Defined contribution plan (profit-sharing, 401(k), stock bonus and money purchase pension plan) and any contributions or forfeitures were allocated to your account for the plan year ending with or within the tax year;
     
  • IRA-based plan (SEP, SARSEP or SIMPLE IRA plan) and you had an amount contributed to your IRA for the plan year that ends with or within the tax year; or
     
  • Defined benefit plan (pension plan that pays a retirement benefit spelled out in the plan) and you are eligible to participate for the plan year ending with or within the tax year.

Box 13 on the Form W-2 you receive from your employer should contain a check in the “Retirement plan” box if you are covered. If you are still not certain, check with your (or your spouse’s) employer.

The limits on the amount you can deduct don’t affect the amount you can contribute. However, you can never deduct more than you actually contribute.