Are IRA Contributions Tax Deductible?
Written by
Rudri Patel
Edited by
Emily Gadd
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IRA contributions are generally tax-deductible, but there are factors that determine whether you are entitled to a full, partial or no deduction on your taxes.
Find out more about the various factors that influence your ability to reduce taxable income through these retirement savings strategies.
Who Is Eligible to Deduct IRA Contributions?
Your eligibility to deduct your IRA contributions depends on the following:
- Meet income limits. If you make too much, you may not qualify for any deduction or only for a partial one.
- Modified Adjusted Gross Income (MAGI): IRS sets MAGI limits that determine deduction eligibility.
- Tax filing status. There are different thresholds for married and single-filing candidates.
- Age and Contribution Limits: For 2025, the IRA contribution limit is $7,000 (or $8,000 if age 50+).
2025 Traditional IRA Deduction Income Limits
| Filing Status | Full Deduction MAGI is equal or less than | Partial Deduction MAGI Between | No Deduction MAGI is equal of greater than |
|---|---|---|---|
| Single or Head of Household, Covered by workplace plan | $79,000 | $79,000 – $89,000 | $89,000 |
| Married Filing Jointly, Covered by a workplace plan | $126,000 | $126,000 – $146,000 | $146,000 |
| Married Filing Jointly, Only one spouse has a workplace plan, but you don’t | $236,000 | $236,000 – $246,000 | $246,000 |
| Married Filing Separately, Both covered by workplace plan | Not eligible for full deduction | Less than $10,000 | $10,000 |
How Much Can You Contribute to Your IRA in 2025?
The traditional IRA contribution limit for 2025 is:
- $7,000 per year for individuals under age 50
- $8,000 per year for those 50 and older
Contribution limits can change year to year, so double-check your contribution limits every calendar year.
Participation in Employer-Sponsored Plans
Your participation in an employer-sponsored retirement plan impacts your eligibility to deduct IRA contributions:
- Not covered by a workplace plan. You can deduct the full amount regardless of income.
- Covered by a workplace plan. The amount you can deduct depends on your income.
- If your spouse is covered by a workplace plan. The amount you can deduct depends on both spouse’s combined salary, but income limits are higher.
Step-by-Step Guidelines to Claiming IRA Deductions
If you’re handling your taxes on your own, you want to make sure you’re claiming your deduction correctly. These steps will help guide you to claim the deduction correctly:
- Make sure you qualify for the deduction based on your income.
- On Form 1040, Schedule 1, Line 20 enter your deduction amount correctly.
- If you and your spouse both have 401(k) plans, check your eligibility for a partial or full deduction.
- Make certain your contributions do not exceed annual limits. Otherwise, you will be penalized.
- Keep Form 5498 for your records that show your IRA contributions for the year.
What Happens If You Exceed IRA Contribution Limits?
Keeping track of your IRA contribution is important. If you contribute more than the IRS allows, you will face a penalty. The penalty is 6% tax on any excess contributions every year that the extra payment remains in your account.
If you notice an overpayment, you can:
- Remove the excess contribution before the tax deadline.
- Recharacterize the contribution by converting it from a traditional IRA contribution to a Roth IRA contribution.
- Apply the excess to next year’s limit (keep in mind you will still owe the penalty for one year).
The Bottom Line
Determining the tax deductibility of your IRA contributions requires careful consideration of IRS rules, your participation in employer-sponsored plans and your MAGI.
Understanding these guidelines can help you make informed decisions about your retirement savings and optimize your tax situation. Always consider consulting with a tax professional to navigate the specifics of your individual circumstances.
Editor's note: This article was produced via automated technology and then fine-tuned and verified for accuracy by a member of GOBankingRates' editorial team.
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