Question

If I contribute to a 401K plan, can I open IRA to reduce taxes?

Answer

Regarding the ability to open IRA to reduce taxes, you might be able to contribute deductible amounts to an IRA. It depends on your income.

You can contribute the lesser of:

  • 100% of your annual compensation
  • $6,000 — $7,000 if age 50 or older

However, if you’re covered by a retirement plan at work, your IRA deduction will be reduced or phased out. This is true if your modified adjusted gross income (AGI) is:

If your income is more than these limits, and you open IRA to reduce taxes, you can still make the contributions, but you cannot deduct them.

Related Topics

Related Resources

Retirement Income, Pension And Annuity Tax

Learn more about retirement income tax including pension and annuity taxes from the experts at H&R Block.

Cash in Lieu of Fractional Shares

Learn more about the definition of cash in lieu on your 1099-B and get tax answers at H&R Block.

What Is A Capital Gain Or Loss?

What is a capital gain or loss, and how do they affect your taxes? Learn more from the tax experts at H&R Block.

Investment App Taxes – Robinhood, Acorns & More | H&R Block

Learn more about the tax implications of investment apps like Robinhood, Acorns, Wealthfront & Stash with H&R Block. Accurately report all investment income