Transparent method
The formula
Worked example
Example inputs
How to interpret the result
Whether a traditional IRA contribution is fully deductible, partially deductible or not deductible at all depends on income level and on whether the filer or a spouse is covered by a workplace retirement plan. Two people contributing the identical amount can get very different tax benefits from it based entirely on that coverage status.
Before you rely on it
What to check
Confirm your actual workplace-plan coverage status and current income against the year's official phase-out ranges before assuming full deductibility.
The common error
Where people go wrong with traditional IRA deduction calculator
Assuming every IRA contribution is fully deductible regardless of income or workplace coverage. Above certain income levels with workplace coverage, the deduction phases out partially or entirely, even though the contribution itself is still allowed.
Sensitivity evidence
How IRA contribution changes the potential current tax savings
| IRA contribution | Potential current tax savings | After-tax contribution cost | Deductible contribution |
|---|---|---|---|
| $5,600 | $1,344 | $4,256 | $5,600 |
| $6,300 | $1,512 | $4,788 | $6,300 |
| $7,000worked example | $1,680 | $5,320 | $7,000 |
| $7,700 | $1,848 | $5,852 | $7,700 |
| $8,400 | $2,016 | $6,384 | $8,400 |
Every input, tested
Which input moves the potential current tax savings most
| Input | Tested from | To | Potential current tax savings at each end | Swing |
|---|---|---|---|---|
| IRA contribution | $6,300 | $7,700 | $1,512 to $1,848 | $336 (20%) |
| Marginal income-tax rate | 22.0% | 26.0% | $1,540 to $1,820 | $280 (17%) |
| Deductible share | 98.0% | 102.0% | $1,646 to $1,714 | $67 (4.0%) |
Two variables at once
Potential current tax savings by IRA contribution and deductible share
| IRA contribution \ Deductible share | 96.0% | 100.0% | 104.0% |
|---|---|---|---|
| $5,600 | $1,290 | $1,344 | $1,398 |
| $6,300 | $1,452 | $1,512 | $1,572 |
| $7,000 | $1,613 | $1,680 | $1,747 |
| $7,700 | $1,774 | $1,848 | $1,922 |
| $8,400 | $1,935 | $2,016 | $2,097 |
Step by step
The worked example, input by input
| Input | Value used |
|---|---|
| IRA contribution | $7,000 |
| Deductible share | 100.0% |
| Marginal income-tax rate | 24.0% |
| Potential current tax savings | $1,680 |
| After-tax contribution cost | $5,320 |
| Deductible contribution | $7,000 |
Where the inputs come from
IRA contribution is the amount you plan to make. Deductible share is the portion you can deduct: 100% if neither you nor your spouse is covered by a workplace retirement plan, and reduced or eliminated at higher incomes if you are. The marginal income-tax rate is the top bracket your income falls in, since the deduction saves tax at that rate. The IRS instructions for Form 1040 include the phase-out ranges for the year.
When the result stops applying
If you are covered by a workplace plan and your income is above the phase-out, some or all of the contribution is non-deductible, and you must track the after-tax basis on Form 8606. The deduction applies to the year of the contribution, which can be made up to the tax filing deadline. It does not help those who do not itemize differently, since the IRA deduction is taken above the line.
What to compare it with
Compare with the Roth on the traditional versus Roth IRA calculator, and see the Roth IRA contribution page. The IRA growth calculator projects the balance, and the backdoor Roth page covers non-deductible contributions. The retirement income tax calculator shows the tax when you withdraw.
People also ask
Frequently asked questions
Is my traditional IRA contribution deductible?
Fully, if neither of you is covered by a workplace plan. If you are covered, the deduction phases out at higher incomes based on filing status.
When can I make a contribution for the tax year?
Until the tax filing deadline of the following year, usually mid-April, so you can decide after seeing your return.
What if I cannot deduct the contribution?
You can still contribute, tracking the basis on Form 8606 so you are not taxed twice, or use the money for a Roth instead if you are eligible.