IRA Deduction MAGI Limits 2021
Employment

IRA Deduction MAGI Limits 2021

The contributions made to traditional or other qualifying IRA retirement accounts are deductible but the Internal Revenue Service has income limits for this deduction. The IRA contributions deduction isn’t also a part of the itemized deductions.

It’s found under adjustments to income on Schedule 1-Additional Income and Adjustments to Income. So the income limits aren’t related to the adjusted gross income as the IRA deduction is a part of the deductions that lower your adjusted gross income. Having said that, the IRA deduction is related to modified adjusted gross income.

Your modified adjusted gross income, also known as MAGI is basically your adjusted gross income but certain adjustments are added back. This includes:

  • exclusion for adoption expenses
  • IRA deduction
  • taxable Social Security payments
  • passive income or loss
  • partnership losses
  • excluded foreign income
  • rental losses

Add the above deductions back to your adjusted gross income or simply don’t account these when using Schedule 1 to calculate modified adjusted gross income. You can then compare it with the income thresholds below.

Note: The income thresholds are divided depending on whether or not you OR your spouse is covered by a retirement plan at work.

Covered by a retirement plan at work

FILING STATUSMODIFIED ADJUSTED GROSS INCOMEELIGIBLE FOR
Single or Head of HouseholdLess than $65,000
$65,001 to $75,000
$75,001 or more
Full Deduction
Partial Deduction
No Deduction
Married Filing Jointly or Qualifying Widow(er)Less than $104,000
$104,000 to $124,000
$124,001 or more
Full Deduction
Partial Deduction
No Deduction
Married Filing SeparatelyLess than $10,000
$10,001 or more
Partial Deduction
No Deduction

If you’re not covered by a retirement plan at work, you can deduct any of your contributions without any income threshold. However, if you’re married filing jointly with a spouse that’s covered by a retirement plan at work or you are covered by a retirement plan at work but your spouse isn’t, the below income thresholds are subjected to you.

  • Full deduction for MAGI under $196,000.
  • A partial deduction for MAGI between $196.000 and $206,000.
  • No deduction for MAGI more higher than $206,000

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