401k Married Filing Jointly

401(k) retirement plans is the most common way Americans ave up for their retirement years if not the only one. Although there is a lot that goes into contributing to a 401(k) retirement plan, your tax filing status is something that doesn’t affect anything.

The only tax-related topic of 401(k) retirement plans is their deductible portion. If you’re contributing to a traditional 401(k) retirement plan, your contributions are going to be tax-deductible. Because the taxes are taken out already, Roth 401(k) contributions do not qualify for a tax deduction.

However, if you also have an IRA, your income and filing status does matter.

Threshold for Couples Filing Jointly

Same as 401(k) contributions, your IRA (Individual Retirement Account) contributins are tax deductible. But a certain threshold apply to claim this deduction. For married filing jointly, there threshold for the IRA contribution deduction.

If you or your spouse’s IRA contributions are covered by the workplace, the phaseout threshold is between $104,000 to $124,000. Therefore, if the taxable income is more than $124,000, the IRA contributions deduction completely phases out.

For 401(k) contributions, on the other hand, your income does not matter to claim the deduction. So you can be making more than $124,000 to and still be able to claim the 401(k) contribution deduction. You aren’t limited by your income or your filing status.

Given the 401(k) contribution limit is increased to $20,000 for 2021, this deduction can significantly reduce your taxable income while you’re saving up for your future. However, your contributions to a Roth 401(k) do not qualify as you are already taxed on your contributions. This is one of the reasons why we recommend picking a traditional 401(k) over Roth 401(k). Especially if your income is likely to be in the same range or less in retirement.

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