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June 1, 2019
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I am not going to contribute to a 401k at work because they do not match. I want to make a 5500 contribution to a traditional IRA. Will the full 5500 be tax deductible?

  • June 1, 2019
  • 2 replies
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    Best answer by Hal_Al

    The fact that your employer has a 401k means that "you have a retirement plan at work". Just because you choose not to contribute, does not get you out of the restrictions on being able to deduct an IRA contribution.

    Here are the MAGI phase-out ranges for tax year 2017 if you participated in another retirement plan:

    • Single, Head of Household, or Married Filing Separately, the phase-out range is $62,000 – $72,000
    • Married Filing Jointly or Qualified Widower, the phase-out range is $99,000 – $119,000
    • Married Filing Separately (but lived with your spouse), the phase-out range is $0 – $9,999

    2 replies

    Hal_Al
    Hal_AlAnswer
    Employee
    June 1, 2019

    The fact that your employer has a 401k means that "you have a retirement plan at work". Just because you choose not to contribute, does not get you out of the restrictions on being able to deduct an IRA contribution.

    Here are the MAGI phase-out ranges for tax year 2017 if you participated in another retirement plan:

    • Single, Head of Household, or Married Filing Separately, the phase-out range is $62,000 – $72,000
    • Married Filing Jointly or Qualified Widower, the phase-out range is $99,000 – $119,000
    • Married Filing Separately (but lived with your spouse), the phase-out range is $0 – $9,999
    June 1, 2019

    It depends if the $5,500 is tax deductible.

    You can contribute to a Traditional IRA as long as you have earned income and you are under the age of 70 and 1/2. For a Traditional IRA contribution, once you reach the year in which you turn age 70 ½ you are no longer eligible to make a contribution. 

    For any Traditional IRA deduction, to reduce your tax liability it depends on your filing status, your income, and if you or your spouse is covered by a retirement plan with your Employer. If you do, there are a couple of possibilities. If you (and a jointly-filing spouse) didn’t contribute to an employer-sponsored retirement plan, like a 401 (k), or self-employed retirement plan your entire Traditional IRA contribution is deductible.

    But if you (and/or your jointly-filing spouse) contributed to an employer-sponsored or self-employed retirement plan in 2017, the amount you can deduct will depend on your tax filing status and modified adjusted gross income (MAGI).

    Note that if your MAGI is:

    • Below the phase-out range—your entire contribution is deductible.
    • Above the phase-out range—you can’t deduct anything.
    • Within the phase-out range—you can make a partial deduction (we’ll calculate this for you).

    Here are the MAGI phase-out ranges for tax year 2017 if you participated in another retirement plan:

    • Single, Head of Household, or Married Filing Separately, the phase-out range is $62,000 – $72,000
    • Married Filing Jointly or Qualified Widower, the phase-out range is $99,000 – $119,000
    • Married Filing Separately (but lived with your spouse), the phase-out range is $0 – $9,999

    If you didn't participate in another retirement plan, but your spouse did, and you're:

    • Filing jointly, the phase-out range is $186,000 – $196,000
    • Filing separately, the phase-out range is $0 – $9,999

    The most you can contribute to all of your Traditional IRA is the smaller of: 

    • $5,500 ( $6,500 if you're age 50 or older by the end of the year) or
    • your taxable compensation for the year. 

    The deadline to make 2017 IRA contributions is until April 17, 2018.