401K & Personal Traditional IRA contributions
Does anyone know if someone who is still working and the company offers a 401K, which you participate in, if you can also contribute to a tax-deductible traditional IRA in 2015? The 401K at work is split into company match dollars going into traditional IRA using pre-tax dollars and employee contribution as after tax dollars into Roth investments. Combined income for self and spouse is well below the >$180K IRA contribution cap and we are aware that the amount can be $6500/year since we are both over the age of 55. Spouse is self employed so their contribution is deductible.
Permalink Submitted by Alan - IRA critic on Sun, 2015-12-06 23:55
Employed 401k participant’s deductible TIRA contribution begins to be phased out at 98k joint modified AGI.Self employed spouse not covered by a retirement plan can make TIRA contribution for which the deduction is phased out beginning at 183k modified AGI. Any deductible TIRA contribution does not reduce modified AGI, but a pre tax 401k contribution does reduce modified AGI.
Permalink Submitted by Dee Waters on Mon, 2015-12-07 00:44
Thanks Alan…still a little confused, forgive me, but what is the “joint modified AGI”. Can you explain in terms of the 1040? Is the “joint modified AGI” the amount after including taxable interest, dividents, business income, etc. on page one or the amount after itemized deductions/exemptions etc.? The adjusted gross income takes into account any IRA deductions. For example line 22 was $75K, line 37 was $71K, and line 41 was $50K, which of these would be considered the “joint modified AGI”?
Permalink Submitted by Alan - IRA critic on Mon, 2015-12-07 02:22
There are several different definitions for MAGI. You start the AGI figure that shows on your tax return. For purposes of deducting TIRA contributions, you have to add back to that figure the items as explained here:http://retirementdictionary.com/definitions/modifiedadjustedgrossincomemagi