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How IRA Tax Deductions Work

        Money | Taxes

IRA Tax Deduction Eligibility for Those With Employer Plans

There's a whole separate set of eligibility rules for IRA contributors who also contribute to or are covered by a retirement plan at work. These rules similarly focus on the taxpayer's adjusted gross income and filing status.

A person who files a tax return as a single individual or head of household can deduct the full amount of their traditional IRA contributions — up to the maximum limit — if he or she earns no more than $60,000 in adjusted gross income over the year. The same individual can get a partial deduction if he or she makes between $60,001 and $69,999. Individuals covered by an employer-sponsored retirement plan and who make $70,000 or more in a given tax year aren't eligible for a deduction [source: IRS].

For a married couple filing jointly, the income limit for the full deduction jumps to $96,000 (combined) if both spouses are covered by a retirement plan through their jobs. Those who earn from $96,001 to $115,999 over the year can take a partial deduction, while those who make $116,000 or more aren't eligible for a deduction [source: IRS].

As with the deduction for taxpayers not covered by an employer-sponsored retirement plan, it pays for married couples to file a joint return. The income restrictions for married folks filing separately is a mere $10,000, and those who fall below this level can only obtain a partial deduction [source: IRS].


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