You can figure your individual retirement account deduction on the IRA Deduction Worksheet in the Internal Revenue Service Instructions for Form 1040, the Individual Tax Return. The amount you can deduct depends on your contributions, your age, your income and the type of IRA you use.
Your deduction for IRA contributions is $0 if you were age 70 1/2 or older by the end of the tax year or if you contributed solely to a Roth IRA, which offers no tax deductions. You also receive no deduction if you make only nondeductible contributions to a traditional IRA, which occurs when your income exceeds certain limits. The limits apply only if you or your spouse were also covered by an employer qualified retirement plan during the tax year. These limits change every year and vary depending on your filing status: single, married filing jointly, married filing separately and qualifying widow(er).
The income limits on IRA deductibility for people covered by employer retirement plans are expressed as ranges. The bottom of the range designates the modified adjusted gross income, or MAGI, which triggers a phase-out in the amount you can deduct. The top of the range specifies the maximum MAGI you can earn and still take a partial deduction; you can't deduct your contribution if your MAGI exceeds this maximum. One set of limits applies if you are the person who is covered by the employer plan. Different limits apply if the covered person is your spouse and you file a joint return. For example, the MAGI limit range in 2014 for single people covered by an employer plan was $60,000 to $70,000. If you file jointly and your spouse is the person covered by an employer plan, the 2014 limits were $181,000 to $191,000.
Assuming your income does not exceed the limits that permit deductions, your contributions to your traditional IRA are deductible to the extent they do not surpass the maximum contributions allowed. For people younger than 50, the maximum contribution as of the time of publication is $5,500. If you're 50 or older, the cap rises to $6,500. If you are married filing jointly, you can include your spouse's income -- minus any IRA contributions your spouse made -- when figuring your maximum contribution. Applicable income includes wages, salaries, tips, alimony, combat pay and self-employed earnings. Your maximum contribution applies to the total you add to all of your IRAs, traditional and Roth.
Enter Your Deduction
Calculate the maximum contribution you are allowed to deduct, taking into account income limits and age-related maximums. Deduct contributions up to this amount by entering the figure as an adjustment to gross income on Form 1040. If your contributions exceeded the allowed maximum, you can apply the excess to future tax returns, but you may have to pay a penalty. If you made nondeductible contributions, file IRS Form 8606.
- IRS.gov: 1040 Instructions
- IRS.gov: Publication 590-A: Contributions to Individual Retirement Arrangements (IRAs)
- IRS.gov: Form 8606 Nondeductible IRAs
- Internal Revenue Service. "Income Ranges for Determining IRA Eligibility Change in 2021." Accessed Nov. 2, 2020.
- Internal Revenue Service. "IRA Year-End Reminders." Accessed Nov. 2, 2020.
- Internal Revenue Service. "About Form 1040, U.S. Individual Income Tax Return." Accessed Nov. 2, 2020.
- Internal Revenue Service. "IRA Deduction Limits." Accessed Nov. 2, 2020.
- Internal Revenue Service. "2021 Limitations Adjusted as Provided in Section 415(d), etc." Accessed Nov. 2, 2020.
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