2023 UPDATE: The IRA Contribution limit has been increased to $6,500 ($7,500 if over age 50) Traditional IRA Deductibility AGI Phaseouts: Taxpayer covered by an employer plan: S/HOH: $73,000 - $83,000. MFJ/QSS: $114,000 - $136,000 Taxpayer not covered by employer plan, but spouse is: MFJ: $218,000- $228,000 Roth IRA Contribution AGI Phaseouts : S/HOH: $138,000 - $153,000. MFJ/QSS: $218,000 - $228,000
I can't think of a good reason. It's just there in case someone does it. Two big disadvantages: It's really easy to "forget" you made the nondeductible contribution when it comes time to withdraw the funds. Next, when it comes time to withdraw, the basis must be prorated until the account is closed. Roth Accounts are superior in this respect, but the parameters for nondeductibility of IRA Contributions are similar to ineligibility for Roth Contributions.
2023 UPDATE:
The IRA Contribution limit has been increased to $6,500 ($7,500 if over age 50)
Traditional IRA Deductibility AGI Phaseouts:
Taxpayer covered by an employer plan:
S/HOH: $73,000 - $83,000. MFJ/QSS: $114,000 - $136,000
Taxpayer not covered by employer plan, but spouse is:
MFJ: $218,000- $228,000
Roth IRA Contribution AGI Phaseouts
:
S/HOH: $138,000 - $153,000. MFJ/QSS: $218,000 - $228,000
Slowly, imperceptibly, I'm gaining understanding on this stuff. Great vids, thanks again!
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Question: why would I contribute to a traditional IRA if I can't deduct it?
I can't think of a good reason. It's just there in case someone does it. Two big disadvantages: It's really easy to "forget" you made the nondeductible contribution when it comes time to withdraw the funds. Next, when it comes time to withdraw, the basis must be prorated until the account is closed. Roth Accounts are superior in this respect, but the parameters for nondeductibility of IRA Contributions are similar to ineligibility for Roth Contributions.
If you are not eligible to contribute in a Roth IRA due to income phase out and deductible traditional IRA.