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Does MAGI include 457 and 403 contributions?

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  • Does MAGI include 457 and 403 contributions?

    This question may sound foolish:

    I earned a grand total of $146k this year (half a year as a fellow and half a year as attending).  However, I contributed the maximum amount ($18k each) to both the 403b and 457b offered by my institution.  This effectively makes my AGI $110k, if I'm not mistaken.  Technically, this falls below the cut off for a Roth contribution.  A modified AGI does not take back into account the 36k contributions, correct?  So with a MAGI of $110k, I can actually contribute directly to a Roth instead of Traditional IRA and then back-door conversion?

    Second part: If I already contributed $5500 to a traditional IRA with the intention of converting (backdoor) to a Roth (but have not yet converted), am I allowed to just switch it over to a Roth directly rather than go through the filling out of an 8606?

  • #2
    See the following, pages 42-44.  Depends on if you have other adjustments but it looks like you're probably in the clear.  I'd double check.

    I would doubt that you can just switch the money over without having to either fill out a form (and get a check back) from your institution or not fill out an 8606.  I believe when you contribute to the traditional (or whatever IRA) it generates a 5498 which goes to the IRS, indicating how you contributed.


    • #3
      Yeah it looks like I have to technically re-characterize the Traditional IRA funds into the Roth via some Schwab paperwork.  Then instead of filling out an 8606 there's a statement to attach to the tax return explaining the decision to re-characterize the funds (in this case, realization that I qualified for Roth Contribution).

      Someone correct me if I'm wrong or there is more to it than this...


      • #4
        Why don't you just go ahead with the back-door Roth? Would you have to pay taxes under the pro-rata rule? If so, your custodian may be willing to reclass your original contribution, but I doubt it this late in the game.
        My passion is protecting clients and others from predatory and ignorant advisors 270-247-6087 for CPA clients (we are Flat Fee for both CPA & Fee-Only Financial Planning)
        Johanna Fox, CPA, CFP is affiliated with Wrenne Financial for financial planning clients


        • #5
          WCICON24 EarlyBird
          Unless you would owe money under the pro rata rule (and if you do, why were you planning to do backdoor Roth?), there is no harm in going ahead with the backdoor Roth even though you could have contributed to Roth the regular way. Form 8606 is simple, just a 1 page form and WCI helpfully included screenshots so you know how it should look when you are done.