If I contribute to a 401K plan, can I open IRA to reduce taxes?
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 $72,000 if filing single or head of household
- More than $92,000 but less than $119,000 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.
Have you ever thought about investing in a Cayman Islands tax haven? Before opening an account, or making adjustments to an already existing account, review these tax tips.
Learn more about the myRA retirement planning account by the U.S Treasury Department from the tax experts at H&R Block.
Should you count supplemental security income as taxable income? Learn more from the tax experts at H&R Block.
Learn more about social security tax and how it affects your income and benefits from the tax experts at H&R Block.