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Are IRA Contributions Tax Deductible?

January 22, 2022

IRAs and brokerage accounts can play an important role in a retirement strategy. While there are some similarities between these types of savings vehicles, there are many important distinctions.

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Individual retirement accounts, or IRAs, can be an integral part of many retirement savings strategies. These tax-advantaged accounts offer future retirees a way to optimize their retirement strategy—but how do their tax advantages work and are contributions deductible when it’s time to file income taxes?

Are IRA contributions tax deductible?

It’s safe to say that all IRA accounts are tax-advantaged. Whether or not an individual’s contributions into that account are tax-deductible, however, depends on the type of IRA they have, if they have a workplace retirement plan, and how much they earn each year.

Regardless, they are bound to a maximum total IRA contribution limit of $6,000 per year for 2021 and 2022. If an account holder is over age 50, they can make an extra $1,000 in catch-up contributions, for a total of up to $7,000 toward their IRA(s).

It’s important to note that this is a combined limit—so even if an account holder has two (or more) different IRAs, their total contribution to all of them cannot equal more than $6,000 annually (or $7,000, if they qualify for the catch-up limit).

Traditional IRA

A traditional IRA is a retirement savings account that allows individuals to contribute with pretax dollars.

Funds contributed to traditional IRAs can be tax-deductible, meaning that contributions can indeed be deducted from an account holder’s overall taxable income for the year in which they’re made. When it comes to deducting those contributions from taxes, though, the amount an individual is allowed depends on whether they also have access to a workplace retirement account, and how much money they (and their spouse, if applicable) make in a given tax year.

In some cases, they’ll be able to deduct their total contribution amount, up to the annual limit of $6,000 (or $7,000, if they qualify). Account holders may also be able to deduct only a portion of their contributions or even none at all.

Filing status Workplace retirement coverage Annual modified AGI (adjusted gross income) Maximum IRA deduction in 2022
Single/Head of household Yes $68,000 or less Full deduction (up to annual limit)
$68,001 - $77,999 Phased (partial) deduction
$78,000+ No deduction
No Any amount Full deduction (up to annual limit)
Married filing jointly/qualifying widow(er) Yes $109,000 or less Full deduction (up to annual limit)
$109,001 - $128,999 Phased (partial) deduction
$129,000+ No deduction
No (qualifying widower or neither is covered) Any amount Full deduction (up to annual limit)
No (but your spouse is) $204,000 or less Full deduction (up to annual limit)
$204,001 - $213,999 Phased (partial) deduction
$214,000+ No deduction
Married filing separately Yes (you or your spouse) Less than $10,000 Phased (partial) deduction
$10,000+ No deduction
No (neither spouse is covered) Any amount Full deduction (up to annual limit)

Roth IRA

A Roth IRA, on the other hand, works a bit differently.

Contributions are made with after-tax dollars, so there is no Roth IRA tax deduction offered come tax time. Instead, Roth IRA contributions are allowed to grow until retirement; when the time comes to withdraw the funds, both contributions and any growth can be withdrawn tax-free.

The bottom line

Contributions to a Roth IRA are tax-advantaged in that the contributions and even decades’ worth of growth can be withdrawn tax-free in retirement. However, contributions to a Roth IRA are not tax-deductible and won’t do anything to reduce one’s taxable income today.

A traditional IRA’s contributions, on the other hand, may be tax-deductible. This depends on certain factors such as an individual’s modified AGI and whether or not they (or even their spouse) are also covered by a retirement plan in the workplace. Contributions to a traditional IRA can either be fully deductible, partially deductible, or not deductible at all.

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