IRA & 401K contributions
I have a client who was eligible to contribute to a 401K at end of 2012. He took advantage of this and contributed $2K. Can my client still make a TAX DEDUCTIBLE IRA contribution for 2012 if his Income is over the household limit?
My thought was that since they made a 401K contribution (no matter how small) it makes them inelgible to make a tax deductible IRA contribution since their income is too high. Is this correct?
Permalink Submitted by Alan - IRA critic on Tue, 2013-03-26 20:02
Yes, but client needs to determine if his modified AGI is too high or not. The limit depends on marital filing status. If client cannot deduct the contribution, his income might still permit him to make a Roth contribution and if so he could recharacterize his TIRA contribution to a Roth contribution. A Roth is always better than a non deductible TIRA contribution.