March 27, 2021

Deduction

Your Guide

Definition

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

Retirement Dictionary Staff

Frequently Asked Questions Regarding

72(t) payments – also referred to as Substantially Equal Periodic Payments (SEPP) can be taken from IRAs, qualified plans-including 401(k) plans, and 403(b) accounts. However, while 72(t) payments can be taken from IRAs at any time, they can be taken from qualified plans and 403(b) accounts only after the participant has separated from service with the employer that sponsored the plan. Therefore, if you are still employed by the company that sponsored your 401(k) plan, you cannot take 72(t) payments from that account.  But, if you are no longer employed by that company, then you may be able to take 72(t) payments from the account.

Please contact our office to help you determine if a 72(t) payment program is suitable for you.

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