What Are the Traditional IRA Deduction Limits?
Understand the factors that determine your traditional IRA tax deduction. Your income and access to other retirement plans play a key role in your eligibility.
A Traditional Individual Retirement Arrangement (IRA) offers a method for saving for retirement on a tax-deferred basis. One of its advantages is the potential to deduct contributions from your current-year taxable income, which can result in a lower tax bill. This deduction effectively reduces your income as calculated for tax purposes. The ability to claim this deduction, however, is not universal and depends on rules defined by the Internal Revenue Service (IRS). The amount you can deduct is contingent upon your income, your tax filing status, and whether you or your spouse are covered by a retirement plan at work.
Annual IRA Contribution Limits
Before considering deductibility, you must know the maximum amount the IRS permits you to contribute to an IRA each year. For the 2024 and 2025 tax years, an individual can contribute up to $7,000. This limit applies to the total contributions made to all of your traditional and Roth IRAs combined. Your total contributions cannot exceed your taxable compensation for the year.
Individuals age 50 and over can make an additional “catch-up” contribution. For 2024 and 2025, this amount is an extra $1,000, bringing the total potential contribution to $8,000 for this age group.
The deadline for making contributions for a tax year is the tax filing deadline of the following year, such as April 15, 2026, for the 2025 tax year. This allows you to make contributions after the year has ended but before you file your taxes.
Deduction Rules if Covered by a Workplace Retirement Plan
Your ability to deduct traditional IRA contributions changes if you are covered by a retirement plan at work. You are considered covered if you or your employer made contributions for the year to a defined contribution plan, like a 401(k), or if you were part of a defined benefit pension plan. This status is indicated by the “Retirement plan” box being checked on your Form W-2.
If you are covered by a workplace plan, your deduction eligibility is determined by your Modified Adjusted Gross Income (MAGI). For the 2025 tax year, the deduction is phased out over specific income ranges. If your MAGI is below the range, you can take a full deduction. If it falls within the range, your deduction is partial, and if your MAGI is above the range, you cannot deduct your contributions.
For a single individual or head of household, the 2025 phase-out range is $79,000 to $89,000. For those married filing jointly, the range is $126,000 to $146,000. For married individuals filing separately who lived with their spouse during the year, the phase-out range is $0 to $10,000.
For example, a single individual under 50 covered by a 401(k) with a MAGI of $84,000 in 2025 falls within the phase-out range. The calculation for the partial deduction involves determining how far their income is into the range and reducing the maximum deductible amount proportionally.
Deduction Rules if Not Covered by a Workplace Retirement Plan
The rules for deducting IRA contributions simplify if you are not covered by a retirement plan at your job. In this situation, you can deduct the full amount of your contribution, up to the annual limit, regardless of your income level.
A specific rule applies to married couples where one spouse is covered by a workplace plan, but the other is not. The spouse who is not covered may still be able to take a full or partial deduction, but this is subject to a separate, higher MAGI phase-out range.
For 2025, if you are not covered by a workplace plan but your spouse is, your IRA deduction is phased out if your joint MAGI is between $236,000 and $246,000. If your combined income is below $236,000, you can take a full deduction for your contribution. If your income is above $246,000, no deduction is permitted for your contribution.
Reporting Nondeductible Contributions
When your MAGI exceeds the applicable limits, you can still contribute to a traditional IRA, but you cannot deduct the contribution. These are known as nondeductible contributions, and you must keep a record of them to ensure they are not taxed a second time when you withdraw them in retirement.
The method for tracking this is IRS Form 8606, Nondeductible IRAs. You must file this form for any year you make a nondeductible contribution, which establishes your “cost basis” in the IRA. This basis is the total amount of your after-tax contributions and is not taxed upon distribution.
For example, if you make a $7,000 nondeductible contribution, you would report this on Form 8606. When you later take distributions from any of your traditional IRAs, a portion of that distribution will be considered a tax-free return of your basis. Failure to file Form 8606 can result in all of your distributions being taxed, including the portion that should have been tax-free.