A Simple Guide to IRA Contributions & Deductions

IRA rules can feel confusing fast — MAGI limits, phase-outs, employer plans… it’s a lot.

But once you understand how these pieces work together, you can make smarter decisions about what you can contribute, what you can deduct, and what strategy actually makes sense for you.

Let’s break it down.

How IRA Deductibility Works

Whether your Traditional IRA contribution is deductible depends on three main factors:

✔️ Your filing status
✔️ Whether you (or your spouse) are covered by a workplace retirement plan
✔️ Your Modified Adjusted Gross Income (MAGI)

If you’re covered by a workplace retirement plan, income limits come into play. If you’re not, the rules are much more favorable.

Traditional IRA Deduction Phase-Out Ranges

If you are covered by a workplace retirement plan:

• Single / Head of Household:
  Deduction phases out between $73,000 – $83,000

• Married Filing Jointly (both covered by a workplace plan):
  Phase-out between $116,000 – $136,000

• Married Filing Jointly (one spouse covered by a workplace plan):
  Phase-out between $218,000 – $228,000

• Married Filing Separately:
  Partial deduction up to $9,999, none at $10,000+

IRA Contribution Limits

IRA contribution limits are the same for both Traditional and Roth IRAs:

💰 Under age 50: Up to $7,000
💰 Age 50 or older: Up to $8,000 (includes $1000 catch-up contribution)

Real-Life Examples

Example 1: Jack & Jill (MFJ, both covered)

Jack and Jill are both under 50 and each participates in their employer's workplace retirement plan. Their MAGI is $120,000.

Jack maxed out his workplace plan contributions. He can still contribute to a Traditional IRA, but cannot deduct it due to income limits.
👉 Result: Non-deductible IRA + Form 8606 required

Jill contributed less to her employer plan. Since their MAGI is within the phase-out range, she can take a partial deduction on her IRA contribution.

Example 2: Peter (Single, covered by a plan)

Peter earns within the phase-out range and is covered by a workplace plan.

Peter can contribute up to $7,000 — but:
✔️ Only part of it is deductible
✔️ The rest becomes non-deductible
✔️ Form 8606 is required to track basis

Example 3: Janet & Bob (MFJ, NOT covered)

Janet and Bob are not covered by any employer workplace retirement plan.

✔️ No income limits apply
✔️ Both can fully deduct their IRA contributions

Janet contributes $7,000
Bob contributes $8,000 (including catch-up) because Bob is over 50 years old.

👉 Both contributions are fully deductible

Roth IRA Contributions: What to Know

Roth IRAs work differently.

❌ Contributions are not deductible
✔️ But withdrawals can be tax-free

Income limits still apply:

• Single / HOH: $146,000 – $161,000 phase-out

• MFJ: $218,000 – $228,000 phase-out

• MFS: Limited to $0–$10,000

Contribution limits are the same as Traditional IRAs.

Key Takeaways

✔️ Deductibility depends on income + access to a workplace plan
✔️ You can still contribute even if you can’t deduct
✔️ Non-deductible IRAs require Form 8606
✔️ Roth IRAs offer tax-free growth but no upfront deduction

IRA strategy isn’t just about contributing — it’s about choosing the right type of contribution for your situation.

Final Thoughts

IRA rules can feel overwhelming, but once you understand how they work, they become a powerful planning tool.

The goal isn’t just to contribute — it’s to contribute strategically.

👉 If you’re unsure what you qualify for or whether a Traditional, Roth, or backdoor strategy makes sense, book a call with Lisa Brugman, EA & Associates.

Let’s make sure your retirement planning is optimized, compliant, and actually working for you.