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is there any solid reason why somebody in there mid 30s who cannot have a roth ira, or the deductibility of a traditional ira to still contribute to an ira just not deduct it. if my wife and i both contribute 2k each and don't deduct it, we will have that money taxed twice no? ordinary income taxes apply when we take distributions, so unless I can make enough money on it through tax free capital gains there would be no reason.

Help me if I am missing something.
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if my wife and i both contribute 2k each and don't deduct it, we will have that money taxed twice no?

No, but be sure to file the appropriate form (I don't know the number) to establish your "tax basis" (after-tax contribution) for the IRA.

In retirement, the portion of the payouts considered the return of after-tax contributions will not be taxed again, but the rest (pre-tax contributions and all of the earnings) will be taxed at ordinary income tax rates.
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if my wife and i both contribute 2k each and don't deduct it, we will have that money taxed twice no?

No. When you withdraw money from your IRA you would not be taxed on a portion of the withdrawl because of the non-deductible contribution you made. You will not be taxed twice.

--Peter
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Thanks,

I am using turbo tax and when I fill it out as a non deductible IRA I am assuming that it is filling out the appropriate forms.

I appreciate it.
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is there any solid reason why somebody in there mid 30s who cannot have a roth ira, or the deductibility of a traditional ira to still contribute to an ira just not deduct it.

You report your nondeductible contributions on Form 8606, Part I, which is attached to your 1040. (One 8606 for each of you)

IMO whether you should make nondeductible traditional IRA contributions depends on how you intend to invest. If your investment mix includes assets which yield current ordinary income (short-term holdings, dividends, interest), an IRA is a good place to keep them. You'll not be taxed on these ordinary income items until retirement, and then possibly at a lower rate than during your working years.

OTOH, if you intend to invest long-term in stocks that don't pay dividends, you're probably better off holding them in a taxable account. There will be no tax until you sell, and then at a reduced rate not available for gains within an IRA.

Phil Marti
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Thanks Phil,

I am investing in high yielding bond funds that I don't want to get waxed on taxes.

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