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EJBJ
Level 2

IRA deduction

I'm confused with the requirement that in order to reduce your taxes, the only IRA contribution option is to a "traditional IRA".  But we have already paid taxes on that money, so when it's time to withdraw it, we will have to pay taxes again.  What am I missing?

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Accepted Solutions

IRA deduction

You are confused.

If you contribute $7,000 for 2021, you get a deduction of $7,000 now.

If such a deduction doesn't help you, don't do it.

 

IRS does not care if you took the money out of your savings to do this. That's generally what happens.

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4 Replies

IRA deduction

if you are permitted a deductible IRA contribution,

then you deduct it in the tax year for which it was made.

You are not double taxed.

 You have one business day left to decide.

@EJBJ 

EJBJ
Level 2

IRA deduction

I need to clarify that the contribution to the "traditional IRA" will be with money that has already been taxed as income previously (it's sitting in a savings account).  So, contributing it to a traditional IRA will require that contribution to be taxed again upon withdrawl.  Hence my confusion for why is contributing to a traditional IRA is the only way to receive the additional deduction?

IRA deduction

You are confused.

If you contribute $7,000 for 2021, you get a deduction of $7,000 now.

If such a deduction doesn't help you, don't do it.

 

IRS does not care if you took the money out of your savings to do this. That's generally what happens.

EJBJ
Level 2

IRA deduction

Thanks, fanfare!  Now the light bulb finally turned on for me to understand!

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