IRA Tax Deduction Income Limit: Are You Eligible?

A Traditional Individual Retirement Arrangement (IRA) allows you to make pre-tax contributions that can grow tax-deferred until retirement. The primary tax benefit is that these contributions may be tax-deductible, which lowers your current taxable income. Eligibility for this deduction depends on your income, tax filing status, and whether you have access to a retirement plan through your employer. These rules are designed to direct tax benefits to lower and middle-income individuals.

Determining Coverage by a Workplace Retirement Plan

The first step to determine your eligibility is to know if you are “covered by a retirement plan at work,” as defined by the IRS. The income limits for the deduction differ based on this status. Workplace plans can include a 401(k), 403(b), pension plan, SEP IRA, or SIMPLE IRA. If you are eligible to participate in such a plan, you are considered covered for the year, even if you do not contribute.

The most direct way to confirm your status is by examining your Form W-2. If the “Retirement plan” checkbox in Box 13 is checked, the IRS considers you covered for that tax year. This status dictates which set of income rules you must follow.

Deduction Limits if You Are Covered by a Workplace Plan

If you are covered by a workplace retirement plan, your deduction eligibility is based on your Modified Adjusted Gross Income (MAGI) and filing status. For 2025, the deduction phases out over specific income ranges, meaning as your income increases, the amount you can deduct decreases, eventually reaching zero. These income thresholds are indexed for inflation and may change in future tax years.

For single or head of household filers, a full deduction is available with a MAGI of $79,000 or less. The deduction phases out for a MAGI between $79,000 and $89,000, and no deduction is allowed at $89,000 or more. For those married filing jointly or a qualifying widow(er), a full deduction is permitted with a MAGI of $126,000 or less, with a phase-out between $126,000 and $146,000.

If you are married filing separately and lived with your spouse during the year, a partial deduction is only allowed if your MAGI is less than $10,000, and no deduction is permitted if your income is $10,000 or more.

Deduction Limits if You Are Not Covered by a Workplace Plan

The rules for deducting Traditional IRA contributions are more generous if you are not covered by a retirement plan at work. The specific limitations depend on whether your spouse has coverage through their employer.

If you are single, or if you are married and your spouse is also not covered by a workplace plan, you can deduct your full IRA contribution up to the annual limit, regardless of your income. For 2025, the maximum contribution is $7,000, or $8,000 if you are age 50 or older.

A different set of rules applies if you are not covered by a workplace plan, but your spouse is. For those married filing jointly, a full deduction is allowed if your combined MAGI is $236,000 or less. The deduction is phased out for incomes between $236,000 and $246,000, and no deduction is allowed if your MAGI exceeds $246,000.

Calculating Your Modified Adjusted Gross Income (MAGI)

To use the income tables, you must first calculate your Modified Adjusted Gross Income (MAGI), as this figure is not listed on your tax return. The starting point is your Adjusted Gross Income (AGI), found on line 11 of Form 1040.

To convert your AGI to MAGI for this purpose, you add back certain deductions you may have taken. Common add-backs include:

• The IRA deduction itself
• Student loan interest deduction
• Foreign earned income or foreign housing exclusions
• Interest from U.S. savings bonds that you excluded from income

For example, if your AGI was $70,000 after a $2,500 student loan interest deduction, your MAGI for the IRA calculation would be $72,500. The IRS provides a worksheet in the Form 1040 instructions to guide this calculation.

Calculating a Partial Deduction

If your MAGI falls within the phase-out range for your filing status, you are eligible for a partial deduction. The IRS provides a specific worksheet for this calculation in Publication 590-A, “Contributions to Individual Retirement Arrangements (IRAs).” The formula determines what portion of the phase-out range your income occupies.

For example, a single filer with a MAGI of $81,000 in 2025 is $2,000 into the $10,000 phase-out range ($79,000 to $89,000). This means they are 20% through the phase-out, so their deduction is reduced by 20%. If the maximum contribution is $7,000, a 20% reduction ($1,400) leaves a deductible amount of $5,600.

There are two final rules for this calculation. The result must be rounded up to the next $10 if it is not already a multiple of 10. Also, if the final calculated deduction is between $0 and $200, you are permitted to deduct $200.