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:
- More than $58,000 but less than $73,000 if filing single or head of household
- More than $92,000 but less than $121,000 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.
