Author Topic: Couldn't sleep, please help me understand this  (Read 2655 times)

doneby35

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Couldn't sleep, please help me understand this
« on: November 30, 2016, 12:05:18 PM »
My income is 106,000 before taxes. Filing Jointly, stay at home spouse, so total income is 106,000.
I sold some individual stocks this year with gains of 6300 and one with a loss of 2600 which is a total of 3700 gains.
My 401K contributions will end the year with 8500.

Where does this leave me with wanting to max out an tIRA before the end of the year for both me and my unemployed spouse?
Is it 106,000 (income) + 3700 (capital gains - capital losses) - 8500 (401k) = 101,200? and if so, that puts me above the 98,000 full deductibility limit for a tIRA, should I wait until next year to contribute to tIRA in this case?

ender

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Re: Couldn't sleep, please help me understand this
« Reply #1 on: November 30, 2016, 12:16:13 PM »
It's a little too late for this, but your situation is one where preferring a 401k instead of an IRA during the year is exactly the right decision.

Can you bump your 401k contribution for December up significantly? Why not put it as close to 100% as you can for the rest of this year, if you can put $3k more into your 401k then you'll be right around full deductibility for your tIRA.

Do you have an HSA? That counts against MAGI too.

terran

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Re: Couldn't sleep, please help me understand this
« Reply #2 on: November 30, 2016, 12:25:37 PM »
Also, since your AGI is under $184k, and you are covered by a retirement plan at work, but your wife is NOT covered by a retirement plan at work, she could make a fully deductible spousal IRA contribution based on your income. See https://www.irs.gov/retirement-plans/plan-participant-employee/2016-ira-contribution-and-deduction-limits-effect-of-modified-agi-on-deductible-contributions-if-you-are-not-covered-by-a-retirement-plan-at-work

doneby35

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Re: Couldn't sleep, please help me understand this
« Reply #3 on: November 30, 2016, 12:28:23 PM »
It's a little too late for this, but your situation is one where preferring a 401k instead of an IRA during the year is exactly the right decision.

Can you bump your 401k contribution for December up significantly? Why not put it as close to 100% as you can for the rest of this year, if you can put $3k more into your 401k then you'll be right around full deductibility for your tIRA.

Do you have an HSA? That counts against MAGI too.

I only starting contributing to 401k 2 paychecks ago, I'm contributing 60% of my paycheck which is the max, with that i will reach 8500.
I enrolled for HSA during enrollment period a month ago so nothing so far.

doneby35

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Re: Couldn't sleep, please help me understand this
« Reply #4 on: November 30, 2016, 12:31:32 PM »
Also, since your AGI is under $184k, and you are covered by a retirement plan at work, but your wife is NOT covered by a retirement plan at work, she could make a fully deductible spousal IRA contribution based on your income. See https://www.irs.gov/retirement-plans/plan-participant-employee/2016-ira-contribution-and-deduction-limits-effect-of-modified-agi-on-deductible-contributions-if-you-are-not-covered-by-a-retirement-plan-at-work

So i can open one for her only and fully deduct it? and maybe next year open mine for me as well?

terran

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Re: Couldn't sleep, please help me understand this
« Reply #5 on: November 30, 2016, 12:50:04 PM »
So i can open one for her only and fully deduct it? and maybe next year open mine for me as well?

No, but she can open one for herself :-). I know it seems like semantics, but this will be her IRA in every way.

If you will have a MAGI under the limit next year then you can also open one for yourself, although you might consider sticking more in your 401k instead unless it has poor fund choices?

Also, you can still open a Roth IRA for 2016 anytime up until your tax filing deadline. If you have an emergency fund you could consider putting it in a Roth IRA until you're able to afford to max out all tax advantaged space. While you may end up having to withdraw it, maybe you won't in which case it's better than losing the tax advantaged space forever. See https://www.bogleheads.org/wiki/Roth_IRA_as_an_emergency_fund

doneby35

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Re: Couldn't sleep, please help me understand this
« Reply #6 on: November 30, 2016, 12:59:37 PM »
So i can open one for her only and fully deduct it? and maybe next year open mine for me as well?

No, but she can open one for herself :-). I know it seems like semantics, but this will be her IRA in every way.


I see ok so she opens one for herself and then I contribute to it from my income and it would be fully deductible.

catccc

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Re: Couldn't sleep, please help me understand this
« Reply #7 on: November 30, 2016, 01:16:24 PM »
So i can open one for her only and fully deduct it? and maybe next year open mine for me as well?

No, but she can open one for herself :-). I know it seems like semantics, but this will be her IRA in every way.


I see ok so she opens one for herself and then I contribute to it from my income and it would be fully deductible.

Pretty much.  FWIW, my husband gives me permission to open it up for him...  Just because it's easy to pretend to be him behind a keyboard.

BTW, we are in a similar boat,  I make about 90K, DH kicks in another 15K or so from part time work (he is our primary child care provider).  After I max out my 401K, we can both contribute to a tIRA and get the full deduction.  It works nicely.  If you ever get too close and your taxable portfolio and the market are in the right place for it, you might want to try some tax loss harvesting to get your income down a bit further.  Don't forget if you have benefits at work and you pay in cost share, those usually reduce your AGI, as well.

boarder42

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Re: Couldn't sleep, please help me understand this
« Reply #8 on: November 30, 2016, 01:44:03 PM »
So i can open one for her only and fully deduct it? and maybe next year open mine for me as well?

No, but she can open one for herself :-). I know it seems like semantics, but this will be her IRA in every way.


I see ok so she opens one for herself and then I contribute to it from my income and it would be fully deductible.

Pretty much.  FWIW, my husband gives me permission to open it up for him...  Just because it's easy to pretend to be him behind a keyboard.

BTW, we are in a similar boat,  I make about 90K, DH kicks in another 15K or so from part time work (he is our primary child care provider).  After I max out my 401K, we can both contribute to a tIRA and get the full deduction.  It works nicely.  If you ever get too close and your taxable portfolio and the market are in the right place for it, you might want to try some tax loss harvesting to get your income down a bit further.  Don't forget if you have benefits at work and you pay in cost share, those usually reduce your AGI, as well.

you should get an ambigous Sex named partner like my wife and I either of us can pretend to be the other on the phone.  its pretty great.

doneby35

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Re: Couldn't sleep, please help me understand this
« Reply #9 on: November 30, 2016, 01:47:23 PM »
Makes sense. Then I guess i'll open one for her (or have her open one for herself) and contribute to that since it is automatically deductible whether my MAGI is over 98,000 or not, and then next year i'll open mine for myself as well since i'll be fully maxing out both 401k and HSA.


you should get an ambigous Sex named partner like my wife and I either of us can pretend to be the other on the phone.  its pretty great.

Too late for that now, unless I can convince her to legally change her first name to match mine or vice versa :P

boarder42

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Re: Couldn't sleep, please help me understand this
« Reply #10 on: November 30, 2016, 01:54:03 PM »
Makes sense. Then I guess i'll open one for her (or have her open one for herself) and contribute to that since it is automatically deductible whether my MAGI is over 98,000 or not, and then next year i'll open mine for myself as well since i'll be fully maxing out both 401k and HSA.


you should get an ambigous Sex named partner like my wife and I either of us can pretend to be the other on the phone.  its pretty great.

Too late for that now, unless I can convince her to legally change her first name to match mine or vice versa :P

doesnt have to match just be gender neutral