Contribute to a Traditional Non-deductible IRA AND a 401k?
My tax advisor just told me that you can’t contribute to both a traditional, nondeductible IRA and a 401K in the same year.
I’ve researched all the logical places, including the IRS website, but do not see anything that says the above.
Can you tell me if what she said is true?
Permalink Submitted by Alan Spross on Thu, 2008-05-29 20:55
That is not correct. If you have earned income you can always make a non deductible TIRA contribution. The 401k participation does have the affect of eliminating your ability to deduct your IRA contribution if your AGI is over a certain amount, but if loss of the deduction is not an issue, you can still contribute.
If your income is not too high, you can also contribute to a Roth IRA, and if you are eligible for the Roth contribution, it would be preferable to making a non deductible TIRA contribution. For many higher income taxpayers, however, a non deductible TIRA contribution is all they are eligible for. These contributions can then be converted to a Roth IRA in 2010 when the income limits ends for conversions. This conversion would be taxable under the pro rate rules.