Can I deduct my Individual Retirement Account (IRA) contribution on my tax return?
Roth IRA contributions are never tax deductible; you must pay taxes on Roth IRA funds before you place them in your account. Traditional IRA contributions are often tax deductible, but you must meet several requirements.
If you or your spouse do not participate in a retirement plan at work, your traditional IRA contribution is fully deductible up to your contribution limit, which is based on your income. If you are single, the maximum tax deductible contribution phases out once your modified adjust gross income (MAGI), (we’ll just call it “income” for simplicity’s sake) exceeds $60,000 and you become ineligible for a tax deduction when your income reaches $70,000. If you’re married filing jointly, the maximum tax deductible contribution phases out once your income exceeds $181,000 and you become ineligible for a tax deduction when your income reaches $191,000. In other words, if your income is below these levels ($60,000 for singles and $181,000 for married couples filing jointly), you can make the maximum contribution and it will be fully deductible. The maximum contribution for 2014 is $5,500, but taxpayers who are 50 or older can contribute up to $6,500. If your income is in between these levels ($60,000 to $70,000 for singles and $181,000 and $191,000 for married couples filing jointly), your contribution will be partially deductible, and if it is above these levels ($70,000 for singles and $191,000 for married couples filing jointly), it is not tax deductible at all.
If you are married filing jointly and your spouse participates in an employer-sponsored retirement plan but you do not, the same limits apply. If your income is more than $181,000 but less than $191,000, you’ll be able to take a deduction, but it will be less than the full amount. Once your income reaches $191,000 in this case, you can’t deduct any of your IRA contribution on your tax return.
If you’re married filing separately, the tax deduction limits are drastically lower regardless of whether you or your spouse participate in an employer-sponsored retirement plan. If your income is less than $10,000, you can take a partial deduction; once you hit $10,000, you don’t get any deduction.
If you’re married filing jointly and both you and your spouse participate in an employer-sponsored retirement plan, the maximum tax deductible contribution phases out once your income exceeds $96,000 and you become ineligible for a tax deduction when your income reaches $116,000.
You can still contribute up to the annual maximum for the year to your traditional IRA ($5,500 in 2014, or $6,500 if you’re 50 or older, subject to your contribution limit) even if you can’t deduct all of it. Effectively, you’ll be making part of your contribution with after-tax dollars instead of pre-tax dollars if you max out your contribution despite facing a limited tax deduction based on your income.
If you or your spouse are not covered by a Retirement plan at work, then you can deduct your Traditional IRA contribution up to the maximum annual amounts allowed (2016 is $5,500 plus $1,000 catchup if you are over 50).
If you or your spouse are covered by a Retirement Plan at work and your income is above certain limits, you may be restricted on deducting your IRA contributions. Here is the link to see the income limits for deductible contributions https://www.irs.gov/retirement-plans/plan-participant-employee/2016-ira-contribution-and-deduction-limits-effect-of-modified-agi-on-deductible-contributions-if-you-are-covered-by-a-retirement-plan-at-work
ROTH IRA contributions are not tax deductible. They are made with after tax contributions and get tax free withdrawals on the back end (assuming you are 59 1/2 when you take the money out).
Traditional IRA contributions MAY be deductible. If you (and/or your spouse) are not covered by a plan at work, then you should be able to deduct the full amount. However, if you (and/or your spouse) are covered by a retirement plan at work, then your deduction may be limited based on your income. See here for more details ... https://www.irs.gov/retirement-plans/ira-deduction-limits
The best thing to do would be to talk to a CPA to help with tax planning.