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
  • $5,500 — $6,500 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.

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