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I live in the USA, married, and file my taxes jointly with my husband. I had a job A in Jan-Aug of 2016 and I put $ 2,472.37 on my 401(k) account pre-tax. Now in Sept-Dec I have another job, B, and they do not offer 401(k) or any other plan for retirement. I plan to put some amount to my Traditional IRA account in Sep-Dec 2016, but am I allowed to do it at all, and if yes, how much can I put pre-tax? Is there any calculator to calculate it? Or can I simply put maximum amount $5,500? I also own my own business beside my full-time job for an employer, it operates all year long, and I have an income every month - is this fact any helpful for idea of putting some funds on my IRA account in 2016? My husband is self-employed (and he doesn't participate in any 401(k)) and he plans to put on his Traditional IRA account $5,500 for the year 2016. Am I right, that his IRA has nothing to do with my Traditional IRA or my 401(k)?

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    Your husband's IRA has nothing to do with your IRA. The I in IRA stands for Individual and not Irish as some people believe because both Ronald Reagan and Tip O'Neill were of Irish ancestry. – Dilip Sarwate Sep 11 '16 at 20:07
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Disclaimer: I am not a tax professional, and this is not tax advice. You should consult a tax professional. The information below is my reading of IRS publication 590-A which discusses IRA contributions in detail.

There are two kinds of IRAs - Roth and Traditional. They are different and have different rules. A Traditional IRA allows you to take deductions for contributions now, but then you are taxed on withdrawals at retirement. Conversely, in a Roth IRA you do not get to take deductions for contributions, but withdrawals at retirement (including all earnings) are tax-free. Since you said "pre-tax" in your question, I am assuming that you have a Traditional IRA, and I will focus on that type in this answer.

With a Traditional IRA there are two questions to consider: how much are you allowed to contribute, and how much of that contribution are you allowed to take as a tax deduction? These may not be the same depending on your situation. Let's consider them one at a time.

How much can you contribute?

This depends on your age and, to a certain extent, your income. The amount you contribute to your IRA does not depend on what you contributed to your 401(k), and is separate from your husband's IRA.

  • If you are under 50, you can contribute up to $5500.
  • If you are 50 or over (but under 70½), you can contribute up to $6500.
  • If you're over 70½, then you can't contribute anymore and have to start taking withdrawals (from traditional IRA, not Roth).
  • You can't contribute more than you actually made. So if you made only $3000 during the year then you could only contribute $3000. (However, there is a special rule where if you didn't make much money and your husband did, he could contribute to your IRA on your behalf [or vice versa]. But seeing as this probably does not apply to your situation, I won't go into detail on this.)

How much of a deduction can you take for your contributions?

This depends on your income, your tax filing status and whether or not you or your husband were covered by a retirement plan (e.g. a 401(k) plan) at work.

You said in your question that you are married, file your taxes jointly, and that you had a 401(k) for part of the year. It sounds like your husband does not have a 401(k). Here are the rules that apply to you based on this info (taken from page 13 of IRS Pub 590-A):

  • If your combined income (MAGI) is $98,000 or less, you can take a full deduction for your contributions.
  • If your combined income is more than $98,000 but less than $118,000, you can take a partial deduction. To figure out how much, there is a worksheet on page 17 of Pub 590-A you can use.
  • If your combined income is more than $118,000, then you can't deduct any of your contributions.

For your spouse, since he does not have a 401(k), the limits are higher:

  • If your combined income is $183,000 or less, he can take a full deduction.
  • If your combined income is more than $183,000 but less than $193,000, he can take a partial deduction.
  • If your combined income is more than $193,000, then he can't deduct any of his contributions.
  • Thank you, @Brain Rogers! You've read my post correct. I will edit my post to make it more clear. – Sleepy Hollow Sep 11 '16 at 16:47
  • No problem; glad I could help. – Brian Rogers Sep 11 '16 at 16:54
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    I edited to add one datum, pls confirm you agree with it. – JoeTaxpayer Sep 11 '16 at 17:28
  • @JoeTaxpayer Your edit is fine, but it wasn't really needed. I think I made it clear in the first paragraph that the rules are different for Roth and Traditional IRAs, and my answer was focusing on Traditional IRAs only. For a Roth, you are right that there is no upper bound on age, but you may not be able to contribute at all if your income is too high. For Traditional, there's no upper income limit for contribution eligibility, but there is a limit on age. – Brian Rogers Sep 11 '16 at 18:59
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The one bit missing from Brian's remarkably comprehensive answer is Solo-401(k). I happen to use Schwab for this, but other brokers offer as well. I offer this as you appear to want to shelter more money than may be possible, and the Solo offers a $50K or so limit when you include employer (you) deposits. It's a great choice for the self employed, and offers you flexible investing opinions.

  • Thank you, @Joe Taxpayer! It is an interesting option, and I am looking into it. – Sleepy Hollow Sep 11 '16 at 19:14
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    @SleepyHollow - my pleasure. If you read this, the "accepted" really belongs to Brian. He answered in wonderful detail, the question as asked. – JoeTaxpayer Sep 11 '16 at 19:38
  • I didn't know I couldn't accept two answers as useful. Thank you for pointing it out and thank you again for your help. – Sleepy Hollow Sep 11 '16 at 22:03
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    @SleepyHollow - you can upvote all helpful answers. But "accept" just one. This time, I don't deserve it. I appreciate you're fixing this. – JoeTaxpayer Sep 11 '16 at 22:18

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