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TheBeatdigger t1_iy8xwtc wrote

I don’t understand this rule even after just reading a full article about it.

So if I make between 68-78k annually AND have a company sponsored 401k then my IRA contributions are not tax deductible?

So what if I make 79k? Why is it a specific range instead of just saying $68k and up?

If I make 68-78k but don’t have an employer 401k then it’s business as usual for the deduction? Or similarly if I have a work 401k but make less than 68k?

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MosDefNoDoubt OP t1_iy9lvxr wrote

The $68k to $78k range is a phase-out. Below $68,000, your entire contribution is deductible (making it the pre-tax contribution most people are used to with traditional accounts). The portion of your contribution that is deductible phases out at incomes between $68,000 and $78,000. At incomes above $78,000, none of the contribution is deductible.

I haven't looked at the phase-out schedule specific to this scenario, but when I looked in regards to the phase-out of the LLC (Lifetime Learning Credit), it was proportional. The phase-out occurs over $10,000 dollars, so 10% or $1,000 above the minimum threshold would make 10% of the contribution non-deductible.

Again, this is only if your employer offers a company-sponsored retirement plan. The numbers are different otherwise.

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thegelatoking t1_iy90b41 wrote

There is a phase out of the amount you deduct from taxes if you have income in that range. Can't remember the specific math but if you're at $68K you can deduct only 5000, if $69K you can deduct only 4000, etc until it's completely phased out to cannot deduct any.

Business as usual if you don't have an employer 401k

PS not exact numbers because I can't remember...but example of how it works.

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