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)

Hot Definitions
  1. Derivative

    A security with a price that is dependent upon or derived from one or more underlying assets.
  2. Fiduciary

    A fiduciary is a person who acts on behalf of another person, or persons to manage assets.
  3. Sharpe Ratio

    The Sharpe Ratio is a measure for calculating risk-adjusted return, and this ratio has become the industry standard for such ...
  4. Death Taxes

    Taxes imposed by the federal and/or state government on someone's estate upon their death. These taxes are levied on the ...
  5. Retained Earnings

    Retained earnings is the percentage of net earnings not paid out as dividends, but retained by the company to be reinvested ...
  6. Demand Elasticity

    In economics, the demand elasticity refers to how sensitive the demand for a good is to changes in other economic variables. ...
Trading Center