How Much Can You Deduct for IRA Contributions?

For the 2026 tax year, the IRA contribution deduction limits are $7,500 if you’re under 50 and $8,600 if you’re 50 or older.¹ Whether you get to deduct the full amount comes down to two things: your income, and whether you or your spouse is covered by a retirement plan at work. If neither of you has a workplace plan, every dollar you contribute is deductible no matter how much you earn. Once a workplace plan is in the picture, the deduction shrinks as your income climbs and eventually disappears.

The 2026 Contribution Ceilings

The IRS applies one annual cap across all of your Traditional and Roth IRAs combined. For 2026 that cap is $7,500 for anyone under age 50.² If you turn 50 or older by the end of the year, you can add a $1,100 catch-up contribution, for a total of $8,600. The catch-up amount is now inflation-adjusted under SECURE 2.0; it sat at $1,000 for years before it started moving.¹

One rule overrides the dollar cap: you can’t contribute more than your taxable compensation for the year. Earn $4,000 and your maximum contribution is $4,000, not $7,500.² Taxable compensation means wages, salaries, tips, bonuses, commissions, and net self-employment income. Pre-2019 alimony and certain taxable fellowship or stipend payments also qualify. Investment income does not: rental income, dividends, interest, capital gains, pension payments, and deferred compensation are all excluded.³ That’s why a retiree living off portfolio income alone can’t fund an IRA. There’s no age floor for contributions, and the old ban on contributions past 70½ was repealed by the SECURE Act of 2019.

A note on Roth IRAs: Roth contributions are never deductible in exchange for tax-free qualified withdrawals later. The rest of this article covers the Traditional IRA deduction, which is where the income and workplace-plan tests apply.

Full Deduction With No Workplace Plan

If neither you nor your spouse is covered by an employer-sponsored retirement plan, you can deduct every dollar you contribute to a Traditional IRA at any income level.⁴ Contribute up to $7,500 (or $8,600 if 50 or older), and the entire amount comes off your taxable income. This is the easy case.

Phase-Outs When a Workplace Plan Is Involved

Once you or your spouse participates in an employer retirement plan, the IRS starts limiting the deduction across a range of income called the phase-out range. Above the top of the range, the deduction is gone entirely. For 2026 the ranges depend on your filing status and which spouse is covered:⁵

Single or head of household, you are covered by a plan: full deduction if your modified adjusted gross income (MAGI) is $81,000 or less; partial deduction from $81,000 to $91,000; no deduction at $91,000 or above.
Married filing jointly, both spouses covered: full deduction up to $129,000; partial from $129,000 to $149,000; no deduction at $149,000 or above.
Married filing jointly, you are not covered but your spouse is: full deduction up to $242,000; partial from $242,000 to $252,000; no deduction at $252,000 or above.
Married filing separately, either spouse covered: partial deduction if your MAGI is under $10,000; no deduction at $10,000 or above. This range is not indexed for inflation and has held at $0–$10,000 for years.

The married-filing-separately range catches people off guard. A couple earning $80,000 jointly might get the full deduction, but if they file separately for any reason, the covered spouse’s deduction all but vanishes.

How the Phase-Out Math Works

Inside the phase-out range, the deduction reduction is proportional. If your MAGI sits at the midpoint of the range, you can deduct half of the maximum contribution. A single filer with a 2026 MAGI of $86,000 is halfway through the $81,000–$91,000 range, so the deductible amount is roughly half of $7,500, or $3,750. The IRS rounds up to the nearest $10, and there’s a floor: if the calculation produces anything above zero but below $200, you can still deduct $200.⁶

Anything you contribute above the deductible amount becomes a non-deductible contribution. You can still make it; you just don’t get the tax break on that portion, and you’ll need to track it (more on that below).

How to Tell If You Are “Covered”

Check your W-2. If the “Retirement plan” box in Box 13 is checked, the IRS treats you as an active participant in an employer plan.⁷ This covers 401(k) plans, 403(b) plans, traditional pensions, SEP-IRAs, SIMPLE IRAs, and most government retirement plans.

The definition is broader than most people expect. For a 401(k) or other defined-contribution plan, you’re considered covered if any contributions or forfeitures were credited to your account during the year, even if the only money going in was an employer match you never asked for. For a traditional pension, you’re covered simply by being eligible to participate, whether or not you’re vested.⁷ Nonqualified deferred compensation plans and 457(b) governmental plans don’t count.

Spousal IRA Deductions

If one spouse works and the other doesn’t, the working spouse can fund a separate IRA for the non-working spouse. The couple has to file jointly, and the working spouse must earn enough to cover both contributions. Maxing out two accounts for contributors under 50 takes at least $15,000 in compensation.²

The deduction rules track the same phase-out framework. If neither spouse has a workplace plan, the spousal contribution is fully deductible at any income. If the working spouse has a workplace plan, the non-working spouse’s deduction uses the more generous $242,000–$252,000 range, because the non-working spouse personally isn’t covered. The working spouse’s own deduction still uses the stricter $129,000–$149,000 range.⁵

What Happens to the Non-Deductible Portion

When part or all of your Traditional IRA contribution isn’t deductible, you report the non-deductible portion on IRS Form 8606. The form creates a permanent record of your “basis,” meaning money you’ve already paid tax on, so the same dollars aren’t taxed again when you withdraw them in retirement.⁸

You need to file Form 8606 in any year you make a non-deductible Traditional IRA contribution, and in any year you take a distribution from a Traditional, SEP, or SIMPLE IRA if you’ve accumulated basis from prior non-deductible contributions. Skipping the form carries a $50 penalty per missed filing, which the IRS can waive for reasonable cause.⁹ The larger cost of not filing is losing track of your basis and paying tax twice on the same money.

The Pro-Rata Rule

You can’t tell the IRS to treat a withdrawal as coming only from your non-deductible contributions. Every distribution is split proportionally between taxable (pre-tax) and tax-free (after-tax) money, based on the ratio of your total basis to your total Traditional IRA balance across all accounts. The IRS uses your account balance as of December 31 of the year you take the distribution, regardless of when in the year you actually withdrew.

If your combined Traditional IRA balance is $100,000 and $20,000 of that is basis, then 20% of any distribution is tax-free and 80% is taxable. The same math applies to Roth conversions. Form 8606 walks you through the calculation each year.

Contribution Deadline

You don’t have to make your IRA contribution by December 31. Contributions for a given tax year can go in up to the tax filing deadline, generally April 15 of the following year.¹⁰ Your 2026 contribution can be made as late as April 15, 2027. Filing for an extension doesn’t push this deadline; the contribution has to be in by the original due date even if you file the return later.

That flexibility matters most when your income lands near a phase-out boundary. You can wait until you finalize your return to see exactly how much of a Traditional IRA contribution will be deductible before deciding what to put in and where.

1
Internal Revenue Service. 401(k) Limit Increases to $24,500 for 2026, IRA Limit Increases to $7,500
2
Internal Revenue Service. Retirement Topics – IRA Contribution Limits
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Internal Revenue Service. Topic No. 451, Individual Retirement Arrangements (IRAs)
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Internal Revenue Service. IRA Deduction Limits
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Internal Revenue Service. 2026 Amounts Relating to Retirement Plans and IRAs, as Adjusted
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Office of the Law Revision Counsel. 26 U.S. Code 219 – Retirement Savings
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Internal Revenue Service. Common Errors on Form W-2 Codes for Retirement Plans
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Internal Revenue Service. About Form 8606, Nondeductible IRAs
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Internal Revenue Service. Instructions for Form 8606
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Internal Revenue Service. IRA Year-End Reminders