Whether you can deduct IRA contributions on your tax return depends on the type of IRA you have, your participation in an employer-sponsored retirement plan and your income. If you're married and file jointly, your spouse's participation in such a plan is also a factor.
Which Type of IRA Do You Have?
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.
Do You Have a Retirement Plan at Work?
If neither you nor your spouse participates in a retirement plan at work, your traditional IRA contribution is fully deductible up to your contribution limit.
The maximum contribution for 2019 is $6,000, up from $5,500 in 2018. Taxpayers who are 50 or older can contribute up to $7,000 ($6,500 in 2018). Note that you can make a contribution up to that year's tax-filing deadline. For example, for 2018 taxes, the IRA contribution deadline is April 15, 2019.
But if either of you participates in a retirement plan, there are income limits on whether (or how much of ) your contribution is tax deductible. The limits increased from 2018 to 2019.
If you are single...
The maximum tax deductible contribution for singles phases out once your modified adjust gross income (MAGI), (we’ll just call it “income” for simplicity’s sake) exceeds $64,000 and you become ineligible for a tax deduction when your income reaches $74,000 (up from $63,000 and $73,000 for 2018).
If you are married filing jointly...
That's when things get complicated. For those married filing jointly, the maximum tax deductible contribution differs significantly based on which person has a workplace retirement plan:
- If the spouse making the IRA contribution is covered by a workplace retirement plan, the deduction starts to phase out once their income exceeds $103,000 and they become ineligible for the tax deduction at $123,000 for 2019 (up from $101,000 to $121,000 in 2018).
- If the IRA contributor doesn't have a workplace plan, but their spouse does, the 2019 limit starts at $193,000 and they become ineligible for a tax deduction when their income reaches $203,000 (the 2018 figures are $189,000 and $199,000).
If you are married filing separately...
For taxpayers in the married filing separately category, the tax deduction limits are drastically lower, regardless of whether they or their spouse participates 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.
Who Can Deduct
In other words, if your 2019 income is below these levels ($64,000 for singles and $103,000/$193,000 for married couples filing jointly), you can make the maximum contribution and it will be fully deductible. The maximum contribution for 2019 is $6,000, up from $5,500 in 2018, but taxpayers who are 50 or older can contribute up to $7,000 ($6,500 in 2018).
If your income is in between these levels ($64,000 to $74,000 for singles and $193,000 to $203,000/$103,000 to $123,000 for married couples filing jointly, depending on which spouse has workplace retirement plan), your contribution will be partially deductible. If it is above these levels ($74,000 for singles and $123,000/$203,000 for married couples filing jointly), it is not tax deductible at all.
Remember That Tax-Free Growth
You can still contribute up to the annual maximum for the year to your traditional IRA even if you can’t deduct all of it. Once your money is in an IRA, it will grow tax-free until retirement. That's a significant benefit.