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. Am I allowed to adjust my AGI for IRA contributions made in 2015?

    I have made above the $100K and am a single tax payer, my employer does offer a 401k plan. I am a little unclear on ... Read Answer >>
  2. Are contribution limits the same for 401k plans as they are for personal IRAs?

    In other words, could I contribute $24k this year to my 401k (I am over 50)? If I decided not to participate, could I put ... Read Answer >>
  3. Should I only contribute to an IRA?

    My employer 401k contributes 3% of my salary regardless if I contribute money or not (there is no matching). I would ... Read Answer >>
  4. Can I contribute to both a 401(k) and an IRA?

    If you contribute to your 401(k) account, you may still contribute to a Roth IRA and/or a Traditional IRA; however, your ... Read Answer >>
  5. I earn more than the income limit for both a Roth and Traditional IRA deduction. ...

    It is always a good choice to fund the individual retirement account (IRA), even if the owner is not eligible to claim the ... Read Answer >>
  6. My spouse has little/no income. Can I contribute to my spouse's IRA?

    Yes. You may make a Traditional IRA contribution to your spouse's Traditional IRA because you have eligible compensation.There ... Read Answer >>
Related Articles
  1. Retirement

    Making Spousal IRA Contributions

    Eligibility requirements, contribution limits and tax deductions all change with one little ring.
  2. Retirement

    Roth vs. Traditional IRA: Which Is Right For You?

    To answer this question, you need to consider several of the factors we outline here.
  3. Retirement

    11 Things You May Not Know About Your IRA

    These little-known features will help you get the most out of your retirement savings.
  4. Retirement

    Traditional IRA Deductibility Limits

    Find out whether you can take a tax deduction on the contributions you make.
  5. Retirement

    IRA Contributions: Deductions and Tax Credits

    We outline the incentives and help you take full advantage of the benefits.
  6. Financial Advisor

    IRAs: Top Things You Need to Know About Them

    By understanding the major rules for both traditional and Roth IRAs, you'll be prepared to enjoy the benefits of these investment opportunities.
  7. Retirement

    Tips On How To Use IRAs To Boost Retirement Savings

    According to the Trustees of the Social Security Fund, the fund will be depleted by 2037. Are you ready?
  8. Retirement

    How Much It Takes to Max Out Your IRA

    IRAs have certain tax advantages that allow your nest egg to grow at a faster rate. But there are annual limits on how much you can contribute.
  9. Retirement

    IRA Contribution Limits in 2016

    Find out about the 2016 limits for contributions and income thresholds for individual retirement accounts, including traditional IRAs and Roth IRAs.
  10. Retirement

    IRA Contributions: Eligibility And Deadlines

    Use this checklist for contribution requirements to make your payments on time.
RELATED TERMS
  1. IRS Publication 590: Individual Retirement Arrangements (IRAs)

    A document published by the Internal Revenue Service (IRS) that ...
  2. Individual Retirement Account - IRA

    An investing tool used by individuals to earn and earmark funds ...
  3. Traditional IRA

    An individual retirement account (IRA) that allows individuals ...
  4. Revoked IRA

    An IRA holder may revoke an IRA within the 7 days after the IRA ...
  5. Recharacterization

    The treatment of a contribution as being made to another type ...
  6. IRA Plan

    A plan that individuals may establish to arrange and plan for ...
Hot Definitions
  1. Cyclical Stock

    An equity security whose price is affected by ups and downs in the overall economy. Cyclical stocks typically relate to companies ...
  2. Front Running

    The unethical practice of a broker trading an equity based on information from the analyst department before his or her clients ...
  3. After-Hours Trading - AHT

    Trading after regular trading hours on the major exchanges. The increasing popularity of electronic communication networks ...
  4. Omnibus Account

    An account between two futures merchants (brokers). It involves the transaction of individual accounts which are combined ...
  5. Weighted Average Life - WAL

    The average number of years for which each dollar of unpaid principal on a loan or mortgage remains outstanding. Once calculated, ...
  6. Real Rate Of Return

    The annual percentage return realized on an investment, which is adjusted for changes in prices due to inflation or other ...
Trading Center