What Is a Traditional IRA Deduction and How Does It Work?

A traditional Individual Retirement Arrangement (IRA) allows individuals to make pre-tax contributions, which can grow tax-deferred. The IRA deduction is a specific tax benefit that permits you to subtract the amount of your eligible contributions from your gross income. The ability to take this deduction, and the amount you can deduct, is not guaranteed for everyone, as eligibility depends on a combination of factors that the Internal Revenue Service (IRS) outlines.

Determining Your Eligibility for the Deduction

Your eligibility to deduct traditional IRA contributions hinges on two primary factors: whether you or your spouse are covered by a retirement plan at work and your Modified Adjusted Gross Income (MAGI). If you are not covered by an employer-sponsored plan, such as a 401(k) or 403(b), you can generally deduct your full contribution regardless of your income.

Your employer indicates whether you are covered by a retirement plan in Box 13 of your Form W-2. If this box is checked, your ability to deduct IRA contributions is subject to income limitations. For the 2025 tax year, a single filer covered by a workplace plan will see their deduction phased out with a MAGI between $79,000 and $89,000.

For those who are married and filing jointly, if the spouse making the IRA contribution is covered by a workplace plan, the income phase-out range for 2025 is $126,000 to $146,000. If you are not covered by a workplace plan but your spouse is, the deduction phases out for a joint MAGI between $236,000 and $246,000. For individuals who are married and filing separately, the phase-out range is much lower, between $0 and $10,000, if they are covered by a workplace plan.

Calculating Your Deduction Amount

The maximum amount you can contribute to a traditional IRA, and thus potentially deduct, is set by annual limits. For 2025, you can contribute up to $7,000 if you are under age 50. Individuals age 50 and over can make an additional “catch-up” contribution of $1,000, bringing their total limit to $8,000.

If your MAGI falls within the phase-out range for your filing status, your deduction is reduced proportionally. The calculation for a partial deduction involves a specific formula based on where your income falls within the applicable range.

Spousal IRA Deduction

The rules also accommodate spouses with little or no earned income through a spousal IRA. This allows a working spouse to make contributions on behalf of a non-working or low-earning spouse, provided the couple files a joint tax return and their combined earned income is sufficient to cover all contributions. The deductibility of the spousal IRA contribution follows the same rules based on workplace plan coverage and MAGI.

Claiming the Deduction on Your Tax Return

You do not need to itemize deductions to claim the IRA deduction; it is considered an “above-the-line” deduction that adjusts your gross income. This means it can be taken in addition to the standard deduction.

The deduction is reported on Schedule 1 of Form 1040, “Additional Income and Adjustments to Income.” The total from the “Adjustments to Income” section of Schedule 1 then flows to your main Form 1040, directly reducing your adjusted gross income (AGI).

Handling Non-Deductible Contributions

If your income exceeds the limits for deducting your traditional IRA contributions, you can still contribute up to the annual maximum. These are known as non-deductible contributions. While you do not receive an immediate tax break for this money, it is important to track these contributions to prevent double taxation in the future.

To report non-deductible contributions, you must file IRS Form 8606, Nondeductible IRAs. This form is used to track your total basis in traditional IRAs, which is the amount you have contributed that has already been taxed. When you eventually take distributions from your IRA in retirement, the portion representing your non-deductible contributions (your basis) will be returned to you tax-free.

Filing Form 8606 is a requirement for each year you make a non-deductible contribution, and also for years when you take distributions from an IRA that has a basis from previous non-deductible contributions. Failing to file this form can result in a penalty and complicates the process of accurately calculating the taxable portion of your future IRA withdrawals.