Traditional IRA Partial Deduction

Forum|Forum|2 years ago
February 26, 2024
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For the 2023 tax year, I was married filing jointly, my spouse and I were under 40 years old, and our MAGI was $121,722. Both my wife and I had 401Ks from our employer. We contributed the max of $6,500 each ($13,000 total) to each of our respective Traditional IRAs. That puts our traditional IRA income deduction phase out range at $116,000 - $136,000. TT’s calculations tells me I can only deduct $9,280, not the full $13,000 Traditional IRA I contributed to. This sounds about right, but I need to know what the math/formula is for coming to this conclusion? I’ve spent hours looking for this formula on Google and TT to no avail. I’ve found several calculators but they don’t seem to match what TT calculated—I don’t know who to believe.

Best answer by MinhT1

Assuming that your MAGI is $121,722, the formula is as follows:

Non Deductible part = ((121,722 - 116,000) / 20,000) x 13,000 = 3,719

Deductible IRA = 13,000 - 3,791 = 9,209

Please note that the number to be used is the Modified AGI, and not the AGI.

For the calculation of the Modified MAGI, see the worksheet 1-1 on page 15 of IRS Publication 590-A.

MinhT1Answer

Assuming that your MAGI is $121,722, the formula is as follows:

Non Deductible part = ((121,722 - 116,000) / 20,000) x 13,000 = 3,719

Deductible IRA = 13,000 - 3,791 = 9,209

Please note that the number to be used is the Modified AGI, and not the AGI.

For the calculation of the Modified MAGI, see the worksheet 1-1 on page 15 of IRS Publication 590-A.

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diasjjAuthor

That's exactly the number Turbo Tax calculated. Thanks for showing the formula and math. Great job providing this impossible to find equation and the IRS source doc.