It’s that (tax) time again! We often get questions about whether or not a contribution made to a Traditional IRA is going to be deductible or not. Here’s everything you need to know:

For 2019, the annual IRA contribution limit is $6,000 (or $7,000 for those age 50+). As a Traditional IRA owner, you may be eligible to take a tax deduction equal to some portion of the amount you contribute to your Traditional IRA for the previous year. Whether or not (and to what extent) you are able to do so can depend on your tax filing status, whether or not you were covered by an employer retirement plan, and your income. If you file…

(1) Single, were covered by a retirement plan, and had AGI…

(a) less than $64,000 in 2019, the entire amount contributed is deductible.

(b) between $64,000 and $74,000 in 2019, a partial deduction is allowed.

(c) greater than $74,000 in 2019, no deduction is allowed.

(2) Single and were not covered by a retirement plan, the entire amount contributed is deductible.

(3) MFJ, were covered by a retirement plan, and had AGI…

(a) less than $103,000 in 2019, the entire amount contributed is deductible.

(b) between $103,000 and $123,000 in 2019, a partial deduction is allowed.

(c) greater than $123,000 in 2019, no deduction is allowed.

(4) MFJ, had a spouse who was the only one covered by a retirement plan, and had AGI…

(a) less than $193,000 in 2019, the entire amount contributed is deductible.

(b) between $193,000 and $203,000 in 2019, a partial deduction is allowed.

(c) greater than $203,000 in 2019, no deduction is allowed.

(5) MFJ and neither you nor your spouse were covered by a retirement plan, the entire amount contributed is deductible.

(6) MFS, were covered by a retirement plan or have a spouse who was, and had AGI…

(a) less than $10,000 in 2019, a partial deduction is allowed.

(b) greater than $10,000 in 2019, no deduction is allowed.

(7) MFS and neither you nor your spouse was covered by a retirement plan, the entire amount contributed is deductible.

The allowable partial deduction amounts above are found by subtracting a reduction amount from the annual IRA contribution limit of $6,000 (or $7,000 for those age 50+) in 2019. The reduction amount is found by multiplying the annual IRA contribution limit by a proportion equal to the amount by which your AGI exceeded the lower limit of the phaseout range divided by $10,000 (or $20,000 in the case of a joint return).

Questions? Please don’t hesitate to give us a call at 970-710-0330.