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March 27, 2021

Deduction

Your Guide

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Definition

A deduction is a Tax write-off which is allowed for contributions to traditional IRAs or employer sponsored plans.

Individuals who are active participants are eligible to deduct their traditional IRA contributions, only if their MAGI amounts do not exceed certain limits. 

 The MAGI that applies to each tax-filing status and in which the individual(s) is covered under and employer sponsored retirement plan is as follows:

Tax Filing Status

2020 MAGI

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2021 MAGI

Allowed deduction

Single

$65,000 or less

$66,000 or less

100%

$65,000 – $75,000

$66,000 – $76,000

Partial

$75,000 or more

$76,000 or more

None

Married filing jointly or a qualifying widower, and active

$104,000 or less

$105,000 or less

100%

$104,000 – $124,000

$105,000- $125,000

Partial

$124,000 or more

$125,000 or more

None

Married filing jointly. Not active, but spouse is active

$196,000 or less

$198,000 or less

100%

$196,000 – $206,000

$198,000 – $208,000

Partial

$206,000 or more

$208,000 or more

None

Married filing separately

Less than $10,000

Less than $10,000

Partial

$10,000 or more

$10,000 or more

None

See Nondeductible contribution

Referring Cite

IRC § 219(g), IRC § 404

Additional Helpful Information

  • Contributions to employer sponsored plans are deductible only if they are within statutory limits
  • The following formula is used to calculate the deductible IRA contribution amount, for an active participant ( see Active Participant)

(Highest dollar limit of MAGI range – MAGI) x(Contribution limit/{Highest dollar limit of MAGI range Lowest dollar limit of MAGI  range})

Written By

Denise Appleby

Denise is CEO of Appleby Retirement Consulting Inc., a firm that provides IRA resources for financial/ tax/legal professionals. She has over 20 years of experience in the retirement plans field, which includes training and technical consultation.

Denise writes and publishes educational /marketing tools for advisors; available at http://irapublications.com. Denise co-authored several books on IRAs

Denise is a graduate of The John Marshall Law School, where she obtained a Masters of Jurisprudence in Employee Benefits, and has earned 5 professional retirement designations.
She has appeared on numerous media programs, sharing her insights on retirement tax laws.

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