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mehtak
New Member

Simple and Traditional IRA

I have a traditional account that I have made contributions to in the past (not 2020). I have now graduated and gotten a job, and my employer has a Simple IRA that I have opted into. Can I make contributions to both accounts in the 2020 tax year? My income is around $70k and I am a single filer with not extra dependents.  I have made the maximum contribution to the Simple IRA already and want to know whether any contributions to the Traditional will be deductible. 

 

Thank you!

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1 Reply
dmertz
Level 15

Simple and Traditional IRA

The limit on your elective deferrals from your pay to the employer's SIMPLE IRA plan is separate from the limit for your contributions to the traditional IRA (other than the fact that you must have sufficient pay left after making the elective deferrals to support the IRA contribution).  However, because the additions to the SIMPLE IRA make you covered by a workplace retirement plan, whether or not your traditional IRA contribution will be deductible will depend on your filing status and your modified AGI for the purpose:

 

The thresholds for deduction of a traditional IRA contribution for 2020 are here:

https://www.irs.gov/retirement-plans/plan-participant-employee/2020-ira-contribution-and-deduction-l...

 

If your modified AGI falls in the phase-out range for the traditional IRA deduction, which it might, you would be better off making the portion of a traditional IRA contribution that would nondeductible be a Roth IRA contribution instead.  For a single filer, the modified AGI where eligibility to make a Roth IRA contribution phases out is higher.  (You might benefit more in the long run to just make your entire personal IRA contribution to a Roth IRA instead of to a traditional IRA even if the traditional IRA contribution would be deductible given today's extremely low tax rates compared to what future tax rates are likely to be, plus growth in the Roth IRA will be tax free instead of tax deferred, once the requirements for qualified distributions are met.)

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