A:

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)

RELATED FAQS

  1. What option strategies can I use to earn additional income when investing in the ...

    Discover how risk-averse investors need to build a retirement portfolio. The major factors are diversification and avoiding ...
  2. What is fiduciary liability insurance, and what are its benefits?

    Understand what fiduciary liability insurance is, what companies or individuals can benefit from having it, and when it is ...
  3. Should I purchase a master limited partnership (MLP) in my retirement account?

    Learn why investors may have to pay taxes on dividends from master limited partnerships, or MLPs, held in individual retirement ...
  4. What are the tax implications of owning a master limited partnership (MLP)?

    Learn about the tax benefits of owning units in a master limited partnership, and understand how distributions are treated ...
RELATED TERMS
  1. Current Service Benefit

    The amount of pension benefit accrued by an employee who had ...
  2. Self Invested Personal Pension (SIPP)

    A tax-efficient retirement savings account available in Great ...
  3. Senior Move Manager

    Senior move managers (SMMs) help seniors downsize and relocate ...
  4. Elder Care

    Elder care, sometimes called elderly care, refers to services ...
  5. Gold IRA

    Definition of Gold IRA
  6. Eligible Transfer

    An IRS-allowed movement of assets into or out of an individual ...

You May Also Like

Related Articles
  1. Professionals

    5 Signs That You Have a Lousy 401(k) ...

  2. Entrepreneurship

    Why Small Business Owners Need Financial ...

  3. Professionals

    How the Robo-Advisors Differ (& How ...

  4. Professionals

    Target Date Funds: More Popular, Cheaper ...

  5. Mutual Funds & ETFs

    This Gold ETF is Fine for Traders, Not ...

Trading Center