We are in a 401(k) at work. Can we also do a Roth each year? If we can, can it also be deducted from our taxes?

By Denise Appleby AAA
A:

Participation in a 401(k) or any other employer plan does not affect your ability to establish and/or fund (or participate in) a Roth IRA.

Roth IRA contributions are not deductible; therefore, you will not be able to take a tax deduction for any contribution you make to a Roth IRA.

If you have taxable compensation for the year, you may establish and fund a Roth IRA. To be eligible to make a participant contribution, your modified adjusted gross income (AGI) must be less than:

-$160,000 if you are married and file a joint tax return.
-$10,000 if you are married, lived with your spouse at any time during the year and file a separate tax return, OR
-$110,000 if you file as single, head of household or married filing separately and did not live with your spouse at any time during the year.

If your modified AGI falls within any of the following ranges, you will not be able to contribute the full amount and must use a certain formula to determine the maximum amount you may contribute to a Roth IRA.

-$150,000 to $160,000 if you are married and file a joint tax return
-$0 to $10,000 if you are married, lived with your spouse at any time during the year and file a separate tax return, OR
-$95,000 to $110,000 if you file as single, head of household or married filing separately and did not live with your spouse at any time during the year.

Your tax professional should be able to assist you with this calculation.

(For more insight, read A Closer Look At The Roth 401(k).)

This question was answered by Denise Appleby.

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