2020 Retirement contributions

Forum|Forum|5 years ago
May 5, 2021
2 replies
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If I have contributed less than the maximum allowable 2020 contribution limit in my employers 401k plan of $7K, shouldn't I be able to contribute the balance of the maximum allowable limit of $7000 into a traditional IRA and get a tax reduction?

In turbo tax Home and Business software it defined that I was covered by an employer 401k plan and so if I add additional IRA contributions it does not reduce the taxes owed?? Do I change the button that selects that I am covered by an employer 401k plan and just add the additional contributions?

Not A Product Question

AmeliesUncle

Level 15

If you participate in an employer retirement plan, there are income limits for being able to deduct a contribution to a Traditional IRA. It does not matter if you contributed the maximum amount through your employer or not.

https://www.irs.gov/retirement-plans/plan-participant-employee/2020-ira-contribution-and-deduction-limits-effect-of-modified-agi-on-deductible-contributions-if-you-are-covered-by-a-retirement-plan-at-work

Opus 17

Level 15

The rules are different for the 2 types of plans. If you participate at work, regardless of your level of contribution, then you are subject to the limits on individual IRA contributions mentioned above. If you are income-limited from participating in a personal IRA, the only way to boost your retirement savings is to maximize your contributions at work.

There is also the "back door" Roth IRA, which is more complicated than I want to get into here.