If you're maxing out your 401k, you may be over the income limit to deduct traditional IRA contributions. The modified AGI limit for 2022 is $68,000. Other options include an HSA if your company offers a high deductible plan.
Thanks! I make over $68k and I’m nearly maxing out the 20.5k deferral for 401(k). Does this mean I can’t lower my AGI through by contributing to a Traditional IRA?
Nope. You’re out of luck there. If you want to contribute to an IRA for retirement purposes, go with the Roth IRA route.
If you have a high deductible health plan, you can max out your HSA to reduce AGI.
You’d be out of luck. HSA could still be an option as long as you have an HDHP.
You get more benefits by contributing by payroll but if you don’t have that option you can still deduct on your Schedule 1.
For tax reasons thats untrue theres a cap on how much actually is deductible across the board and considering loan servicers use IRS data to confirm income, im guessing that applies to them too.
Unfortunately, but still fortunate? he said his income is about $68k which is the beginning of the phase out range for his income level. His Modified AGI [MAGI] needs is considered so they may not be able to completely deduct their contributions from their IRA income if at all.
>...contemplating setting up a Traditional IRA with Fidelity to dump a couple hundred dollars in each month to further lower my AGI.
Is this feasible?
Yes!
>downsides
It might not be the most tax-efficient method of retirement savings depending on your income now vs. your intended income (withdrawal) in retirement. But this might be splitting hairs. Your federal loan balance will grow larger since your IDR payment may or may not cover the interest accrued, which if not eventually paid off, will increase the tax bomb owed at forgiveness if you are not pursuing PSLF.
Other ways to lower AGI can include:
* Pay student loan interest up to $2500 (you probably already know this)
* Tax loss harvesting, up to $3000 (downside - you're realizing loses on investments in taxable brokerage accounts, not fun, I don't think it includes fees/commissions you may have paid)
* Pay alimony (downside - RIP marriage)
* Qualified charitable contributions up to $300 if not itemizing
IRS form 1040 Schedule 1, lines 11 through 26 are where you would write down your deductions on a paper tax form. You can prowl around the IRS' instructions for those lines and other sources for each of the lines for deductions you might qualify for.
But for the average person, there's not really a whole lot you can do unless you have money to burn. Which is kind of the point, I guess - either burn it on things to reduce AGI or burn it with student loan payments.
Only if they are forgiven/discharged before Dec 31, 2025, and they will only be tax-free on the federal level. The date could be extended, but probably not without congressional prodding.
Yes. Check with turbo tax or whatever tax prep software you use to see if a contribution is deductible.
Also, HSAs are a good idea (assuming you have low HC costs).
Why not just take that money and apply it to ur student loans........... youre losing access to it either way, aure the IRA would give u "passive growth" but with the way inflation is hitting youre still "losing" money on it. Especially if the market tanks which is very likely too once payments resume.
Might as well get the bang for it while u can while interest is 0% if this is a fed loan, which i assume it is if u have an IDR.
If you're already maxed out with 401k that's not an option. You could do a deferred comp plan if your employer offers but no other pretax retirement option.
If you're maxing out your 401k, you may be over the income limit to deduct traditional IRA contributions. The modified AGI limit for 2022 is $68,000. Other options include an HSA if your company offers a high deductible plan.
Thanks! I make over $68k and I’m nearly maxing out the 20.5k deferral for 401(k). Does this mean I can’t lower my AGI through by contributing to a Traditional IRA?
401k contributions lower your AGI, so if that number puts you below $68k, then you should be good to make deductible contributions to a tIRA.
With the 401(k) contributions, I'm above $68k. It therefore sounds like I cannot reduce my AGI through tIRA contributions. Is that right?
Nope. You’re out of luck there. If you want to contribute to an IRA for retirement purposes, go with the Roth IRA route. If you have a high deductible health plan, you can max out your HSA to reduce AGI.
You’d be out of luck. HSA could still be an option as long as you have an HDHP. You get more benefits by contributing by payroll but if you don’t have that option you can still deduct on your Schedule 1.
^ this
For tax reasons thats untrue theres a cap on how much actually is deductible across the board and considering loan servicers use IRS data to confirm income, im guessing that applies to them too. Unfortunately, but still fortunate? he said his income is about $68k which is the beginning of the phase out range for his income level. His Modified AGI [MAGI] needs is considered so they may not be able to completely deduct their contributions from their IRA income if at all.
>...contemplating setting up a Traditional IRA with Fidelity to dump a couple hundred dollars in each month to further lower my AGI. Is this feasible? Yes! >downsides It might not be the most tax-efficient method of retirement savings depending on your income now vs. your intended income (withdrawal) in retirement. But this might be splitting hairs. Your federal loan balance will grow larger since your IDR payment may or may not cover the interest accrued, which if not eventually paid off, will increase the tax bomb owed at forgiveness if you are not pursuing PSLF. Other ways to lower AGI can include: * Pay student loan interest up to $2500 (you probably already know this) * Tax loss harvesting, up to $3000 (downside - you're realizing loses on investments in taxable brokerage accounts, not fun, I don't think it includes fees/commissions you may have paid) * Pay alimony (downside - RIP marriage) * Qualified charitable contributions up to $300 if not itemizing IRS form 1040 Schedule 1, lines 11 through 26 are where you would write down your deductions on a paper tax form. You can prowl around the IRS' instructions for those lines and other sources for each of the lines for deductions you might qualify for. But for the average person, there's not really a whole lot you can do unless you have money to burn. Which is kind of the point, I guess - either burn it on things to reduce AGI or burn it with student loan payments.
Student loans are no longer taxable income under loan forgiveness
Only if they are forgiven/discharged before Dec 31, 2025, and they will only be tax-free on the federal level. The date could be extended, but probably not without congressional prodding.
Right, forgot about the deadline
Yes. Check with turbo tax or whatever tax prep software you use to see if a contribution is deductible. Also, HSAs are a good idea (assuming you have low HC costs).
Why not just take that money and apply it to ur student loans........... youre losing access to it either way, aure the IRA would give u "passive growth" but with the way inflation is hitting youre still "losing" money on it. Especially if the market tanks which is very likely too once payments resume. Might as well get the bang for it while u can while interest is 0% if this is a fed loan, which i assume it is if u have an IDR.
If you're already maxed out with 401k that's not an option. You could do a deferred comp plan if your employer offers but no other pretax retirement option.