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

Taxes in the Gig Economy

The gig economy and taxes go hand-in-hand. If gig work is your primary form of income, review these important tax tips from our H&R Block tax professionals.

Freelance Income Tax

Learn more about freelance income tax with advice from the experts at H&R Block.

How Renting Out Your Extra Bedrooms Affects Your Taxes

Thinking about renting out a room in your home? Learn more about the potential tax implications with the experts at H&R Block.

Understanding the Gift Tax

Learn more about the rules of taxable gifts and get answers from the tax experts at H&R Block.