Frequently Asked Question

July 18 2007 | Filed Under » , ,

If I participate in my company’s SIMPLE IRA plan, can I also contribute to another IRA in order to receive a larger tax deduction?

Because the SIMPLE IRA contribution limits are much lower than the 401(k) limits, it might at first seem unfair that you can't get a larger a tax deduction with an additional IRA contribution.

However, the rules concerning IRA deductibility are actually similar for 401(k) plans and SIMPLE IRAs; therefore, even if you meet the compensation requirement to contribute to a Traditional IRA, your active-participant status may affect your eligibility to deduct your Traditional IRA contribution. Bear in mind, however, that it is not only your active-participant status that affects your ability to deduct an IRA contribution; your marital status and modified adjusted gross income (MAGI) are also taken into consideration. It is possible, but not guaranteed, that as an active participant, you will be eligible to claim a deduction for your additional Traditional IRA contribution (or part thereof).

For more details, please see Traditional IRA Deductibility Limits.

This question was answered by Denise Appleby
(Contact Denise)
by

Denise Appleby

Denise Appleby
Denise Appleby is founder and owner of Appleby Retirement Consulting,which provides technical consultation, content, coaching, writing, editing and training services on related topics.


With more than 14 years of experience in the IRA and defined-contribution plans fields, Appleby has held several senior retirement-plan related positions with Pershing LLC, which included vice president of plans products and services, retirement plans manager, trainer, training manager, compliance consultant, technical help desk manager and writer.
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