can you use ‘the same dollars’ to fund workplace 401k and indiv. Trad IRA?
Is it allowable to ‘double-use’ the same dollars to contribute to a workplace 401k and also to an individual Trad. IRA?
Example:
You earn $18,000 annual salary in 2015. You ask your employer to put ALL of it into your 401k. Can you also put $5500 in your own Trad. IRA? Of course you’d have to get the $5500 from other sources, but can you record both both contributions in the same tax year, on your tax return, since you did have earnings of $18,000?
Let’s ignore the fact that this situation is unlikely to occur. Most people who earn only $18,000 are not likely to put all of it into retirement plans. But, I’m trying to understand if you can assign ‘the same dollars’ to two different retirement vehicles in the same tax year.
Permalink Submitted by Alan - IRA critic on Sun, 2016-04-03 03:24
You can if the 401k contribution is to a Roth 401k because that does not reduce your W-2 Box 1 income, leaving the full amount for your IRA contribution, either TIRA or Roth. But a pre tax 401k contribution of your entire salary would wipe out the Box 1 income leaving nothing for an IRA contribution.