🧾 A Simple Guide to IRA Contributions & Deductions

Understanding IRA rules can feel overwhelming, but once you know how filing status, MAGI, and employer plan coverage work together, everything becomes MUCH easier. Here’s a clean, updated breakdown using the most current IRS numbers — no years attached, no confusion.

💡 How IRA Deductibility Works

Whether your Traditional IRA contribution is deductible depends on:
1️⃣ Your filing status
2️⃣ Whether you or your spouse is covered by a workplace retirement plan
3️⃣ Your Modified Adjusted Gross Income (MAGI)

If you are covered by a workplace plan, the IRS applies MAGI phase-outs.
If only your spouse is covered, the phase-out ranges are different.
If neither is covered, your IRA contributions are generally fully deductible, regardless of income.

📊 Traditional IRA Deduction Phase-Out Ranges

If YOU are covered by a retirement plan:

• Single / Head of Household: Deduction begins phasing out at $81,000 MAGI

• Married Filing Jointly: Deduction begins phasing out at $129,000 MAGI

(MFS still has the extremely narrow $0–$10,000 limit.)

If only your spouse is covered by a retirement plan:

• Use the MFJ phase-out range from $242,000 to $252,000

🌈 Roth IRA Contribution Phase-Out Ranges

• Singles / Head of Household: $153,000 to $168,000

• Married Filing Jointly: $242,000 to $252,000

• Married Filing Separately: $0 to $10,000

Roth contributions are NOT deductible, but the income limits matter.

💰 IRA Contribution Limits for 2025

• Under age 50: Up to $7,000

• Age 50 or older: Up to $8,000 (includes $1,000 catch-up)

📚Examples

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

Jack and Jill are under 50, both covered by their workplace retirement plans, and their MAGI falls within the phase-out range for MFJ.

• Jack:
  He maxed his 401(k). He can contribute up to $7,000 to a Traditional IRA, but because their MAGI is too high, none of his IRA contribution is deductible.
  If he contributes, it becomes a non-deductible IRA, and he must file Form 8606.

• Jill:
  She contributed less than the max to her employer plan. Because their MAGI sits inside the MFJ phase-out window, she can deduct part of her $7,000 IRA contribution.
  Any non-deductible amount must be reported on Form 8606.

Example 2: Peter (Single, covered by an employer plan)

Peter is single, covered by a workplace retirement plan, and his MAGI is in the $81,000–$168,000 range, placing him near the center of the Single/HOH phase-out rules (Traditional and Roth each have their own limits).

He can contribute up to $7,000 to an IRA, but because his income is within the phase-out range:

• Only a portion of his Traditional IRA contribution is deductible

• He must calculate the deductible amount using the IRS worksheet

• Any non-deductible portion must be reported using Form 8606

💸 Roth IRA Quick Recap

Roth IRA contributions:
✔️ Not deductible
✔️ Subject to MAGI phase-outs
✔️ Share the same contribution limits as Traditional IRAs ($7,000 / $8,000)

If your MAGI is within the ranges shown above, you may be able to make a partial Roth contribution; if it is above the MAGI phase-out limit, you may need to consider a non-deductible IRA through to a Backdoor Roth IRA strategy instead.

📝 Final Thoughts

IRA rules can be confusing — MAGI here, phase-outs there, worksheets everywhere. But once you break the rules down correctly, you can confidently:

✔️ Maximize your deductible IRA contributions
✔️ Avoid contributing when you’re not eligible
✔️ Track non-deductible IRA basis correctly
✔️ Decide whether a Roth, Traditional, or backdoor approach fits your situation

If you want clarity on your exact eligibility — or help choosing the right IRA strategy — I’ve got you.

👉 Book a call with Lisa Brugman, EA & Associates
Let’s make sure your retirement contributions are optimized, compliant, and working for your long-term wealth.