Question

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

Answer

tax reductionRegarding 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:

  • More than $58,000 but less than $74,000 if filing single or head of household
  • More than $92,000 but less than $123,000 if married filing jointly
  • More than $0 but less than $10,000 if married filing separately

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.

Where to Go For Help With Retirement Savings Accounts and Taxes

Retirement and investment income brings special considerations come tax time. Whether you make an appointment with one of our knowledgeable tax pros or choose one of our online tax filing products, you can count on H&R Block to help you get back the most money possible.

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