topic 401k and IRA deductions in Deductions & credits

401k and IRA deductions

JoeVz — Sun, 07 Mar 2021 18:46:13 GMT

My wife and i contribute to a 401k. I've reached the max contribution limit for over 50. My wife has not reached the contribution limit over 50. Can we contribute to an IRA or other instrument to avoid the tax burden?

Re: 401k and IRA deductions

DanaB27 — Sun, 07 Mar 2021 19:02:51 GMT

Yes, if you have taxable compensation to make the contribution then your wife can contribute to an traditional IRA. If I read correctly you made already maximum contribution to your IRA. Please be aware, your deduction may be limited since you or your spouse were covered by a retirement plan at work if your income exceeds certain levels. Please see IRA deduction limits for details.

Re: 401k and IRA deductions

JoeVz — Sun, 07 Mar 2021 19:11:25 GMT

We are above the IRS limit.

Re: 401k and IRA deductions

DanaB27 — Sun, 07 Mar 2021 19:17:32 GMT

Please be aware, if you make contributions to a traditional IRA and can not deduct the contribution because of your income and retirement plan at work then you can still keep the contribution to the traditional IRA. You will have a basis in the traditional IRA that is tracked on Form 8606. Later when you withdraw money some of that money will be allocated to this basis and will be tax-free.