How Much Can You Deduct for IRA Contributions?

Individual Retirement Arrangements (IRAs) allow individuals to save for retirement while potentially reducing their current tax liability. An IRA is a personal savings plan where investments grow tax-deferred or tax-free, depending on the account type. Contributing to an IRA can lower your taxable income, providing an immediate tax benefit. The specific amount you can deduct depends on your income, tax filing status, and whether you or your spouse are covered by a workplace retirement plan.

IRA Contribution Limits

The Internal Revenue Service (IRS) sets annual limits on IRA contributions. For the 2025 tax year, the standard limit for individuals is $7,000. This limit applies to the total amount contributed across all your Traditional and Roth IRAs combined.

Individuals aged 50 and older can make additional “catch-up” contributions. For 2025, this is $1,000, increasing the total allowable contribution for those 50 and over to $8,000. Contributions cannot exceed your earned income for the year.

Traditional IRA Deductibility Rules

The ability to deduct Traditional IRA contributions depends on whether you or your spouse are covered by a workplace retirement plan. Your Modified Adjusted Gross Income (MAGI) also plays a role in calculating the deductible amount. MAGI is your Adjusted Gross Income (AGI) with certain deductions added back.

If neither you nor your spouse is covered by a workplace retirement plan, your Traditional IRA contributions are fully deductible up to the annual contribution limit, regardless of your income.

If you are covered by a workplace retirement plan, the deductibility of your Traditional IRA contributions is subject to MAGI phase-out ranges. For single individuals or heads of household in 2025, a full deduction is available if your MAGI is $79,000 or less. A partial deduction is allowed for MAGI between $79,001 and $89,000. No deduction is permitted if your MAGI is $89,001 or higher.

For married couples filing jointly in 2025, if the spouse making the IRA contribution is covered by a workplace plan, a full deduction is available if their combined MAGI is $126,000 or less. A partial deduction applies if their MAGI is between $126,001 and $146,000. No deduction is allowed if their MAGI reaches $146,001 or more.

If you are not covered by a workplace plan but your spouse is, your Traditional IRA contribution can be fully deductible if your combined MAGI is $236,000 or less. A partial deduction is available if your MAGI is between $236,001 and $246,000, and no deduction is permitted at $246,001 or higher. For married individuals filing separately who are covered by a workplace plan, the deduction begins to phase out at very low incomes, with a partial deduction for MAGI under $10,000 and no deduction at $10,000 or more.

Non-Deductible Contributions and Roth IRAs

If your income or workplace retirement plan coverage prevents deducting Traditional IRA contributions, you can still contribute up to the annual limit. These are non-deductible Traditional IRA contributions. While they do not provide an upfront tax deduction, earnings within the account still grow tax-deferred until withdrawal.

Contributions to a Roth IRA are never tax-deductible. However, qualified withdrawals in retirement are entirely tax-free. This means contributions and accumulated earnings can be withdrawn without income tax, provided conditions like having the account open for five years and reaching age 59½ are met. Many individuals choose Roth IRAs if they anticipate being in a higher tax bracket during retirement.

Maintain accurate records of any non-deductible Traditional IRA contributions to establish your basis. When taking distributions from a Traditional IRA that contains both deductible and non-deductible contributions, only the earnings on your non-deductible contributions and the deductible contributions are subject to tax. Your non-deductible contributions (your basis) will be tax-free.

Claiming Your IRA Deduction

Report your deductible Traditional IRA contribution on your federal income tax return. This “above-the-line” deduction reduces your Adjusted Gross Income (AGI) regardless of whether you itemize or take the standard deduction. It is reported on Schedule 1 of Form 1040.

The deductible amount of your IRA contribution is entered on Line 20 of Schedule 1. The deadline for making IRA contributions for a tax year is the tax filing deadline, typically April 15th of the following calendar year. For example, 2025 contributions can be made until April 15, 2026.

Your IRA custodian will send you Form 5498, “IRA Contribution Information.” This informational document is provided to you and the IRS, but you do not need to file it with your tax return. It serves as a record of your contributions.