If you contribute to a 401(k) or other employer-sponsored retirement plan, it may affect how much of your traditional Individual Retirement Account (IRA) contribution you can deduct from your taxes. This article explains the rules and income thresholds you need to know.
You can contribute to both an employer-sponsored retirement plan and a traditional IRA. However, your ability to claim a tax deduction for traditional IRA contributions may be limited if you or your spouse is eligible to participate in a workplace retirement plan. The limitation depends on your modified adjusted gross income (MAGI).
If neither you nor your spouse is covered by a retirement plan at work, these income limits do not apply. You can generally take a full deduction.
Traditional IRA contributions may be tax-deductible. This means you may be able to subtract the amount you contribute for a particular tax year from your taxable income in that same year, potentially lowering your current tax bill.
Employer-sponsored retirement plans, like a 401(k), can also offer tax-deductible participant contributions. When you have both account types, specific Internal Revenue Service (IRS) rules apply to determine how much of your traditional IRA contribution you can deduct.
The IRS sets income thresholds each year that determine whether you can take a full, partial, or no deduction for traditional IRA contributions when you or your spouse is covered by an employer-sponsored plan.
Full deduction — your MAGI is below the threshold for your filing status.
Partial deduction — your MAGI falls within the specified phase-out range.
No deduction — your MAGI exceeds the upper limit for your filing status.
The table below applies if you are covered by a retirement plan at work:
Filing status
Modified adjusted gross income (MAGI)
Deduction limit
Single or head of household
$81,000 or less
Full deduction
Single or head of household
More than $81,000 but less than $91,000
Partial deduction
Single or head of household
$91,000 or more
No deduction
Married (filing jointly)
$129,000 or less
Full deduction
Married (filing jointly)
More than $129,000 but less than $149,000
Partial deduction
Married (filing jointly)
$149,000 or more
No deduction
Married (filing separately)
Less than $10,000
Partial deduction
Married (filing separately)
$10,000 or more
No deduction
Note: Income limits and tax rules can change annually. There are also separate income limits that determine if you are eligible to make Roth IRA contributions.
The IRS limits deductions for higher-income earners who already have access to an employer-sponsored retirement plan. This helps distribute tax benefits for retirement savings more equitably and encourages a broader range of individuals to save for retirement.
If you participate in a retirement plan through your employer and are considering contributing to a traditional IRA, start by determining your MAGI for the applicable tax year. Compare it to the IRS income limits for that same year to find out whether your IRA contribution may be tax-deductible.
If your income exceeds the limit, you may still contribute to a traditional IRA, but those contributions will not be tax-deductible. You might also consider a Roth IRA, which has its own income limitations but offers tax-free¹ withdrawals if certain conditions are met.
Pro tip: Consult the latest IRS guidelines or a qualified financial advisor to make the most informed decisions about your retirement savings strategy.
For informational purposes only. This should not be considered financial, tax, or legal advice. Contact a financial professional to evaluate what retirement plan is best suited for your situation.
¹ Roth distributions will be tax-free if the following conditions are met: (a) you're age 59½ or older, or disabled or a first-time homebuyer (lifetime $10,000 limit) AND (b) the distribution is made after the 5-year period has been met, beginning with the first tax year you made a contribution to a Roth IRA. Please consult a qualified financial advisor or tax professional to determine what is applicable to your financial situation.