Most income-earning Americans can make tax-deferred contributions to a traditional IRA. Only those who are eligible for an employer-sponsored plan at work like a 401k (or who have a spouse that is covered) face limits on the amount of the deduction, and only if they make a lot of money. If that impacts you, you need to know the definition of “modified adjusted gross income”. Also know that your earnings on that money will still grow tax-deferred until you withdraw them. Here are the details for 2013:

Tax Filing Status Modified AGI Eligible Deduction
single, head of household, or qualifying widow(er) any amount up to $5,500 ($6,500 for those 50 and older).
married filing jointly or separately and your a spouseis not covered by a plan at work  any amount up to $5,500 ($6,500 for those 50 and older).
married filing jointly and your spouse is covered by a plan at work $178,000 or less up to $5,500 ($6,500 if you’re over 50).
more than $178,000 and less than $188,000 a partial deduction.
$188,000 or more no deduction.
married filing separately and your spouse is is covered by a plan at work  less than $10,000  a partial deduction.
 $10,000 or more  no deduction.
When it comes to traditional IRA deductibility, filing separately and not living with a spouse at all during the year is the same as filing “single”

 

What is My MAGI?

 

The earning limits are also on based something called your modified adjusted gross income (MAGI). MAGI is calculated by taking the adjusted gross income from you tax forms and adding back deductions for things like student loan interest and higher education expenses.

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