If you aren’t covered by a retirement plan at work, you can deduct your entire annual Traditional IRA contribution limit, which is $5,500 for 2017—$6,500 if you’re 50 or older. (This figure, by the way, is the total you can contribute to either a Traditional or a Roth IRA, or to some combination of both types.)
You cannot contribute more than your “taxable compensation,” as defined by the IRS, for the year.
If you or your spouse is covered by a retirement plan at work, you can deduct your contributions based on the income guidelines in the chart below.
If you accidentally contribute too much to your account, take it out again. But until you do, you’ll owe a 6% tax on the excess.
If you are married and file a joint return you may be able to contribute to a spousal IRA if you did not have taxable compensation, as long as your spouse did. The amount of your combined contributions can’t be more than the taxable compensation reported on your joint return. See this formula.
If you do have a plan at work (or your spouse does), follow the formula below to figure out if you can deduct your Traditional IRA contribution.
|Tax Filing Status||Modified AGI or “MAGI”*||Eligible Deduction|
|Single or head of household,||$62,000 or less||$5,500 ($6,500 for those 50 and older)|
|More than $62,000 but less than $72,000||Partial deduction|
|$72,000 or more||No deduction|
|Married filing jointly or separately: You are covered by a plan at work. Or qualifying widow(er) with plan at work||$99,000 or less||$5,500 ($6,500 for those 50 and older).|
|More than $99,000 and less than $119,000||Partial deduction|
|$119,000 or more||No deduction|
|Married filing jointly: You have no plan at work/your spouse is covered by a plan at work||$186,000 or less||$5,500 ($6,500 for those 50 and older).|
|More than $186,000 but less than $196,000||Partial deduction|
|$196,000 or more||No deduction|
|Married filing separately, whether your spouse has a plan at work or not [if you lived with your spouse]||Less than $10,000||Partial deduction|
|$10,000 or more||No deduction|
* What is My MAGI?
The earning limits are based something called your modified adjusted gross income (MAGI). MAGI is calculated by taking the adjusted gross income from your tax forms and adding back deductions for things like student loan interest and higher education expenses.