Author Topic: IRA income limit question  (Read 412 times)

jennifers

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IRA income limit question
« on: December 28, 2018, 02:19:01 PM »
I'm trying to estimate my modified AGI to determine if I can deduct a traditional IRA for 2018.

Because I'm single these rules should apply:
MAGI $63,000 or less: a full deduction up to the amount of your contribution limit.
more than $63,000 but less than $73,000: a partial deduction.
$73,000 or more: no deduction.

According to my paystub for today I made XXXXX dollars this year.
I contributed 18,200 to 401k.
I paid 1,765 for health insurance through my employer (pre tax)

Does that make my MAGI XXXXX- 18,200 - 1765?

I keep reading online that my MAGI also includes the IRA contribution?
I've already put 2,000$ in my traditional IRA for this year, but it looks like I won't be able to get any deduction for it.
Is there anything I can do? Roll over to Roth IRA or just take the money out? It's a Vanguard IRA.

Thanks in advance!

bacchi

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Re: IRA income limit question
« Reply #1 on: December 28, 2018, 03:04:34 PM »
Yes, MAGI is your AGI + tIRA contributions and a few other things.

You'll probably need to recharacterize your tIRA contributions to a Roth. Open a Roth and then call up Vanguard and ask them to recharacterize this year's tIRA contribution. They do it a lot. Do not rollover. Do not convert. The magic word is "recharacterize." You may even be able to do it online.

https://www.irs.gov/retirement-plans/ira-faqs-recharacterization-of-ira-contributions


This is assuming you qualify for a Roth contribution.

https://www.irs.gov/retirement-plans/plan-participant-employee/amount-of-roth-ira-contributions-that-you-can-make-for-2018

MDM

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Re: IRA income limit question
« Reply #2 on: December 28, 2018, 10:06:46 PM »
I keep reading online that my MAGI also includes the IRA contribution?
Yes, you don't get to deduct your contribution in order to be eligible to deduct a contribution. ;)
The MAGI calculation for traditional IRA purposes is https://www.irs.gov/publications/p590a#en_US_2017_publink1000230489.
Then see IRA Deduction Limits | Internal Revenue Service

Quote
I've already put 2,000$ in my traditional IRA for this year, but it looks like I won't be able to get any deduction for it.
Is there anything I can do? Roll over to Roth IRA or just take the money out? It's a Vanguard IRA.
bacchi's answer is best if you are ineligible to deduct a tIRA contribution but eligible to make a Roth IRA contribution.  If you make too much for the direct Roth IRA contribution, there is the Backdoor Roth IRA process.

billy b

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Re: IRA income limit question
« Reply #3 on: December 29, 2018, 09:18:47 PM »
So for 2019 tax year married file jointly, to get the MAGI I can subtract two t401k's and one t457 from my AGI? And if my MAGI is $103,000 I can fully deduct both of our tIRA's?

MDM

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Re: IRA income limit question
« Reply #4 on: December 30, 2018, 02:41:25 AM »
So for 2019 tax year married file jointly, to get the MAGI I can subtract two t401k's and one t457 from my AGI?
No.  The 401k/457 amounts will already have been subtracted from your gross pay and not included in your W-2 Box 1 that feeds form 1040, so they haven't been included in your Form 1040 Adjusted Gross Income (AGI).

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And if my MAGI is $103,000 I can fully deduct both of our tIRA's?
Yes.

billy b

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Re: IRA income limit question
« Reply #5 on: December 30, 2018, 06:00:50 AM »
Got it, thanks. And if I only only qualify for a partial deduction, can I recharacterize the difference at any time (2019 tax year recharacterized in the middle of 2020)?

MDM

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Re: IRA income limit question
« Reply #6 on: December 30, 2018, 01:42:16 PM »
Got it, thanks. And if I only only qualify for a partial deduction, can I recharacterize the difference at any time (2019 tax year recharacterized in the middle of 2020)?
Not "any time" but yes to your example.  See IRA recharacterization - Bogleheads.