Author Topic: Maximizing Deductions with a 401k & Traditional IRA  (Read 1532 times)

Enough

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Maximizing Deductions with a 401k & Traditional IRA
« on: October 19, 2015, 11:11:51 AM »
Well, if you are able to do a 401k, you wouldn't be able to deduct for the traditional IRA

Did not know this before today.  Around June this year I recharacterized my 2015 roth contributions to traditional IRA as I expect my tax rates to be lower in retirement than they are currently. 

I did some research and it seems you can deduct traditional IRA contributions with an employer sponsored 401k if your ModAGI is below 60k, with 60-70k being the phaseout window.

So please doublecheck my maths and let me know if I will be unable to deduct the traditional IRA and should thus unrecharacterize (is that a word?) my contributions back to a roth this year.

                        Amount       Total
Salary                   77500     77500
Bonus                   7300       84800
Misc. Income         1000       85800
401k Deduction   -18000      67800
Trad. IRA Ded.    -5500        62300
HSA Deduction    -2500        59800
Total AGI                             59800

I do not have any taxable investments.

I seem to be clear with a $200 buffer to keep my MAGI below 60k?

johnny847

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Re: Maximizing Deductions with a 401k & Traditional IRA
« Reply #1 on: October 19, 2015, 01:28:08 PM »
Read the rules more carefully. The modified AGI formula for the purposes of the tIRA deduction eligibility is before your tIRA deduction. So your MAGI $65.3k

I'm pretty sure the HSA contribution max is $3350. Any reason you're not maxing that out?

MDM

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Re: Maximizing Deductions with a 401k & Traditional IRA
« Reply #2 on: October 19, 2015, 11:52:43 PM »
Well, if you are able to do a 401k, you wouldn't be able to deduct for the traditional IRA
Did not know this before today.
And, based on what you wrote below, you know it is still false after today.

Quote
I did some research and it seems you can deduct traditional IRA contributions with an employer sponsored 401k if your ModAGI is below 60k, with 60-70k being the phaseout window.
As johnny847 noted, you don't get to claim the tIRA deduction in order to claim the tIRA deduction.  For 2015, the phaseout window for single filers is 61K-71K.  See https://www.irs.gov/Retirement-Plans/IRA-Deduction-Limits and follow the applicable link.

Enough

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Re: Maximizing Deductions with a 401k & Traditional IRA
« Reply #3 on: October 20, 2015, 12:39:43 PM »
I'm pretty sure the HSA contribution max is $3350. Any reason you're not maxing that out?

I didnt do my homework during open enrollment last year.  It will be maxed out in 2016.

Thanks for the help

MDM

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Re: Maximizing Deductions with a 401k & Traditional IRA
« Reply #4 on: October 20, 2015, 12:57:15 PM »
I'm pretty sure the HSA contribution max is $3350. Any reason you're not maxing that out?
I didnt do my homework during open enrollment last year.  It will be maxed out in 2016.
If you are eligible for HSAs you may contribute as much as you want to one or multiple HSA accounts, as long as the total annual contribution meets IRS limits.  If your employer won't allow you to change your contribution (just checking: this is an HSA, not an FSA, correct?), see http://forum.mrmoneymustache.com/taxes/good-hsa-providers/.