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Retirement Beginner: Introduction to Individual Retirement Accounts (IRAs)

Introduction to Individual Retirement Accounts How You Can Fund Your IRA How to Contribute to an IRA How and When IRA Contributions Can Be Deducted from Taxable Income Limits on Deducting IRA Contributions if You Are Single or Married and Filing Separately Limits on Deducting IRA Contributions If You Are Married and Filing Jointly How IRAs Are Taxed Taxing of Deductible and Non-Deductible IRA Contributions Taxes on Excess IRA Contributions IRA Rollovers Premature Withdrawals and Insufficient Distributions from IRAs Summary of Individual Retirement Accounts
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How and When IRA Contributions Can Be Deducted from Taxable Income

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How and When IRA Contributions Can Be Deducted from Taxable Income

Two factors determine whether your IRA contributions can be deducted from your taxable income:

  • Whether another employer-sponsored retirement plan covers the IRA holder
  • Adjusted gross income

Let’s look at each:

Whether another employer-sponsored retirement plan covers the IRA holder

Contributions are fully deductible if you are single and not covered by another employer plan. If you are married and neither you nor your spouse is covered by another employer plan, contributions are also fully deductible.

Adjusted gross income

Contributions to an IRA made in 1987 and after may not be fully deductible if the individual participates in an employer-sponsored retirement plan. Individuals who are covered by such a plan must use their adjusted gross income (AGI) on their tax forms to determine how much may be deducted. Each year the IRS sets the limits for the amount of contributions that can be deducted based upon your AGI.