IRA deduction

Forum|Forum|4 years ago
April 16, 2022
4 replies
11 views

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?

Best answer by fanfare

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.

fanfare

Level 15

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

EJBJAuthor

Level 2

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?