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I have a question about calculating your AGI for planning for whether you can make annual roth ira contribution.

Ok, but the Roth depends on your modified AGI, which has a few more subtractions (Like any IRA conversions) and additions (Traditional IRA deduction, student loan and a few other deductions and exclusions.

Let's say that the wife and I have a combined gross income of $165,000.00. Would the fact that we each contrbute $10,500.00 to our 401(k)'s bring our AGI down to $144,000.00 and permit us to each make $2,000.00 tax-free contributions or are we prevented from doing so because we're above the limit?

Well, any contribution to a Roth IRA isn't tax-free. A contribution to a Roth is with with money already taxed. The $144,000 combined modified AGI brings you below the allowable contribution limit. It;s not whether your contribution is tax-free, it's whether you're permitted to contribute to a Roth or not at all.

Deferred wages from a qualified retirement plan are deductible on your Form 1040 since they were not included in taxable wages on your Form W-2. Your AGI is your gross income minus any deductible retirement plan contributions - the $10,500 to each of your 401k's.


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