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My job offers a 401k, but I don't contribute to it (because it doesn't have a match). Instead, I would rather contribute to an IRA where I can control what I invest in exactly. Here's what the IRS says:

If either you or your spouse was covered by an employer retirement plan, you may be entitled to only a partial (reduced) deduction or no deduction at all, depending on your income and your filing status. Your deduction begins to decrease (phase out) when your income rises above a certain amount and is eliminated altogether when it reaches a higher amount. These amounts vary depending on your filing status.

Let's say I make enough that I wouldn't be entitled to any IRA deduction while contributing to both a 401k and IRA.

Am I ineligible to deduct IRA contributions because my company offers a 401k, even though I don't contribute to it?

  • I presume you've already checked whether the company matches an part of contributions to their 401(k). If they do, and you aren't taking advantage of that, you're leaving free money on the table. – keshlam Jul 17 '15 at 23:56
  • @keshlam Of course, like I said in the question, it doesn't have a match. – David Jul 18 '15 at 1:43
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    Is Box 13 on your W-2 form checked? – BrenBarn Jul 18 '15 at 1:48
  • @BrenBarn I just checked and Box 13 is not checked. So I guess that one is unchecked if you don't contribute, even if one exists. great! – David Jul 18 '15 at 2:51
  • @Dave: It would be prudent to double-check with someone in your company who handles W-2s. Mistakes on W-2s do happen. But yes, in general if the box is not checked that means you don't count as covered. – BrenBarn Jul 18 '15 at 3:01
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According to Investopedia:

Your eligibility to claim a deduction for your Traditional IRA contribution on your federal tax return depends on whether you are an active participant of an employer-sponsored plan in the year to which your deduction applies. If neither you nor your spouse is an active participant, you may deduct your full contribution for the year, up to the contribution limit .

[further down the page]

If you are eligible to make salary-deferral contributions but elect not to, you are not considered an active participant for that year.

This should probably be qualified by nothing that the IRS also says you are considered "covered" by a retirement plan if "any contributions or forfeitures were allocated to your account". In other words, if your employer's plan involves them putting money into your account on their own (regardless of your own contributions), then you are covered.

This is an interesting question that I have seen asked many times but never seen definitively answered by a truly authoritative source (i.e., the IRS or a tax attorney). The above is the clearest info I could find.

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