IRA deductibility
Help! My client changed jobs mid-year and the new company does not provide a retirement plan. She has participated in her old 401k plan throughout this year, having contributed $15,000. Her husband fully contributes to his own 401k plan. My question is, since she can’t continue in a 401k plan for the balance of the year, could she contribute $4500 into an IRA plan this year (with tax deduction) to equal what she would have done in a 401k plan?
Permalink Submitted by Alan - IRA critic on Fri, 2021-09-17 21:54
She can make a TIRA contribution up to the IRA max of 6k (7k if age 50+), but it likely will not be deductible due to their joint modified AGI being too high. Since both spouses are active participants in an employer plan at anytime this year, the IRA deduction begins to phase out at 105k and is totally eliminated at 125k MAGI. The Roth IRA phaseout is higher (198k to 208k), and if she qualifies for the Roth contribution, that is preferable to a non deductible TIRA contribution.