Traditional IRA Deduction Phase-Out Ranges

A traditional IRA deduction phase-out occurs when your modified adjusted gross income (MAGI) and participation in an employer-sponsored retirement plan interact to reduce or eliminate the amount you can deduct on your tax return. Even if you contribute to a traditional IRA, that contribution may not lower your taxable income if your income exceeds certain thresholds.

Why the Phase-Out Exists

The IRS phases out the traditional IRA deduction when you have access to an employer-sponsored retirement plan because the government wants to discourage high-earners from using deductible IRA contributions as an additional tax shelter. If you already have an employer plan available, you are deemed to have sufficient retirement savings opportunity, so the deduction incentive is reduced or removed at higher incomes.

The phase-out does not prevent you from contributing to a traditional IRA—you can still fund one. It only affects whether that contribution is deductible on your tax return.

Who Is an “Active Participant”?

You trigger the phase-out if you are an active participant in a qualified retirement plan at any time during the taxable year. Active participation includes:

• Contributing to or receiving a benefit from a 401(k), 403(b), or similar salary-deferral plan.
• Being covered by and eligible to participate in a defined-benefit pension plan, even if you haven’t yet vested or received a distribution.
• Participating in a SEP-IRA, SIMPLE IRA, or other small-business plan.

If you are not an active participant—for example, your spouse has the plan but you do not—then the phase-out generally does not apply to you, though a separate phase-out can apply to a non-working spouse’s deduction.

How MAGI Is Calculated for IRA Purposes

MAGI differs slightly from your adjusted gross income (AGI). For the traditional IRA deduction phase-out, you typically use your AGI, but you add back certain deductions, including:

• IRA contributions themselves (both deductible and non-deductible).
• Student loan interest.
• Passive loss deductions.
• Rental loss deductions.

Use IRS Publication 590-A to work through the precise definition for your situation.

The Phase-Out Ranges (2025)

The IRS adjusts these brackets annually for inflation. As of 2025:

• Single filer: $77,000–$87,000 MAGI. Below $77,000, full deduction. Above $87,000, no deduction.
• Married filing jointly: $123,000–$143,000 MAGI. Below $123,000, full deduction. Above $143,000, no deduction.
• Married filing separately: $0–$6,000 MAGI. If you file separately and are covered by a plan, the range is extremely tight, and most filers in this situation receive no deduction.

These ranges apply only if you are an active participant. Non-participants generally have no income limit on traditional IRA deductibility.

Calculating a Partial Deduction

If your MAGI falls within a phase-out range, you lose a portion of your deduction. The formula is:

Deduction limit = $7,000 × (Upper limit − MAGI) / Range width

Round up any result that is not a whole dollar amount.

Example: A single filer earns $81,000 MAGI and contributes $7,000 to a traditional IRA while actively participating in a 401(k).

• Upper limit: $87,000
• MAGI: $81,000
• Range: $87,000 − $77,000 = $10,000

Deduction = $7,000 × ($87,000 − $81,000) / $10,000
Deduction = $7,000 × $6,000 / $10,000
Deduction = $7,000 × 0.6 = $4,200

The remaining $2,800 contribution is nondeductible. This nondeductible amount should be reported on Form 8606 to track basis and avoid double taxation on future distributions.

Why Spouses Matter

If you are married filing jointly and only one spouse is an active participant, the phase-out applies only to that spouse’s deduction. The non-participant spouse may still have a full deduction, but a separate phase-out applies if the couple’s MAGI exceeds the married filing jointly threshold—even if the non-participant spouse has no earnings. This rule can be complex; consider professional guidance if this applies to you.

Coordination with Other Retirement Accounts

Contributing to a Roth IRA does not directly affect your traditional IRA deduction phase-out. However, the same MAGI and active participation status determine Roth eligibility. You can have both a traditional and Roth IRA and contribute to both in the same year, but aggregate contribution limits still apply.

If you receive a distribution from a qualified retirement plan, that does not by itself end the phase-out; you remain an active participant for the entire year if you were covered at any point.

The Nondeductible Contribution Path

Many higher-income earners choose to make nondeductible contributions to a traditional IRA when the deduction is phased out. These contributions have after-tax dollars and do not provide a current deduction, but the earnings inside the account still grow tax-deferred. On Form 8606, you report the nondeductible basis so that when you eventually withdraw, only the earnings portion is taxed as income.

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