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I have participated in my previous employer's 401K plan (traditional and Roth) for three months of 2014. My new employer does not allow participation in their plan until one year of service.

Can I contribute and deduct my contribution to a traditional IRA in 2014? Is any level or time of participation in my previous employer's 401K in 2014 enough to make any IRA contributions non-deductible?

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You don't even have to participate in a 401k plan; as long as an employer offers you a 401k plan, that "Retirement" box will be checked on your 2014 W-2 that your employer will send to you in January 2015. With regard to deductability of Traditional IRA contributions, that will depend on your Modified Adjusted Gross Income (MAGI) for 2014, your marital status as of December 31, 2014, and if you are married, then whether your spouse is covered by a retirement plan and your filing status (different thresholds for Married Filing Jointly and Married Filing Separately).

  • More information about deductibility of Traditional IRA contributions from the IRS here. – Craig W Mar 15 '14 at 15:06
  • Makes sense - thanks. I wasn't aware that merely offering the 401k plan was enough to get that boxed checked. – Paul Kearney - pk Mar 15 '14 at 18:11
  • "You don't even have to participate in a 401k plan; as long as an employer offers you a 401k plan, that "Retirement" box will be checked" It seems this is not correct. See irs.gov/pub/irs-pdf/iw2w3.pdf page 28. If neither the employee nor employer contributes to it, the box won't be checked. irs.gov/Retirement-Plans/… also says that for 401ks, you are only considered "covered" if contributions or forfeitures were allocated to it. – user102008 Mar 3 '15 at 1:19
  • @user102008 You might be right; I was remembering a statement in Pub 590 that says "Defined benefit plan. If you are eligible to participate in your employer's defined benefit plan for the plan year that ends within your tax year, you are covered by the plan. This rule applies even if you: (1) Declined to participate in the plan, (2) Did not make a required contribution, or (3) Did not perform the minimum service required to accrue a benefit for the year. – Dilip Sarwate Mar 3 '15 at 3:14
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    @DilipSarwate: Yeah but apparently 401k's are "defined contributions plans". – user102008 Mar 3 '15 at 7:10

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