How to Figure IRA Deduction 1040

How to Figure IRA Deduction 1040
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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.

Read More​: 1040 Line 32 Instructions


In 2019, the SECURE Act was passed to assist in retirement savings planning. Under this new law, the age cap was removed for traditional IRA contributions as well as the zero deduction laws after ​70.5​. It changed the IRS's mandated RMD or required minimum distributions from age ​70.5 to 72​ giving individuals almost two more years to save with benefits. In combination with the age change and the allowed deductions for contributions, seniors can withdraw on their hard-saved retirement funds without having to pay high taxes on their income.

Partial Deductions for IRA

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 2021 for single people covered by an employer plan was ​$66,000 to $76,000​. If you file jointly and your spouse is the person covered by an employer plan, the 2021 limits were ​$105,000 to $125,000​. These limits are for traditional IRAs only.

General IRA Contribution Limits

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 ​$6,000​. If you're 50 or older, the cap rises to ​$7,000​.

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.