Save time with our cheat sheets, fact sheets, checklists & books!

November 12, 2021

Deduction

Print

Deduction

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

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 varies each year. See this page for current limits.

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})

More

Keep Learning

Applicable RMD Age

Applicable RMD Age The first year for which an IRA owner or plan participant must begin to take RMDs from their tax-deferred retirement account. RMDs

SIMPLE 401(k) Plan

Definition A SIMPLE 401(k) plan is a 401(k) plan established by a small business for it’s employees. Earnings accrue on a tax-deferred basis and distributions

Required Minimum Distribution (RMD)

Definition The minimum amount that must be withdrawn from retirement accounts, including qualified plans, 403(b) accounts, 457(b) accounts or IRAs, each year.  For retirement account

Required beginning date (RBD)

Definition The date by which a retirement account owner must begin distributing required minimum distribution (RMD) amounts from a Traditional,  SEP or SIMPLE IRA, a

Be among the first to know when

IRA Rules
Change