Deducting an IRA

SUPPOSE YOU AREN’T covered by an employer’s retirement plan and—if married—your spouse isn’t, either. In that scenario, you can take a tax deduction for your contribution to a traditional IRA, no matter how high your income.

But if you have a retirement plan at work, income thresholds come into play. If your tax-filing status is single or head of household, your ability to take a tax deduction for your IRA contribution phases out if your 2023 modified adjusted gross income is between $73,000 and $83,000. Above $83,000, you can’t take a deduction, though you can still make nondeductible contributions. For 2024, the phaseout range is somewhat higher—$77,000 to $87,000.

Meanwhile, if you are married filing jointly and you’re covered by a retirement plan at work, your ability to deduct your IRA contributions phases out if your combined income is $116,000 to $136,000 in 2023. For 2024, the range is higher—$123,000 to $143,000.

What if you aren’t covered by an employer’s plan, but your spouse is? In that situation, the deductibility of your IRA contribution phases out between $218,000 and $228,000 in 2023 and between $230,000 and $240,000 in 2024.

What if one spouse doesn’t work? As long as the other spouse has enough earned income—remember, you can only make the maximum IRA contribution if you have that much in earned income—the couple can fund an IRA on behalf of the nonworking spouse. If the spouse who works is covered by an employer’s retirement plan, the deductibility of the nonworking spouse’s IRA contribution phases out between $218,000 and $228,000 in 2023 and between $230,000 and $240,000 in 2024.

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