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Are IRA contributions tax-deductible? Yes, IRA contributions are tax-deductible — if you qualify.
To be clear, we’re talking here about contributions to a . Contributions to a are not tax-deductible.
Here’s how to figure out if you qualify to deduct your traditional IRA contributions.
If you, and your spouse if you’re married, don’t have a retirement plan at work, the answer is easy: You qualify to claim a deduction on your tax return for the contributions you make to your traditional IRA. Keep in mind that you must have income from work to contribute to an IRA. (Spouses who don’t have their own income may be eligible for a .)
If you do have a retirement plan at work, or if your spouse does, then your ability to deduct contributions depends on whether your income is above the traditional IRA income limits. (Note: These income limits usually change each year, due to IRS inflation adjustments.)
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Even if you can’t deduct your IRA contributions, you can still make contributions to that account. With a you don’t get to claim an immediate tax deduction, but your money grows tax-deferred. When it comes time to withdraw your money in retirement, you’ll owe taxes on the investment earnings in a nondeductible IRA, but not on the money you contributed, assuming you follow the .
Keep in mind that the annual maximum contribution of $6,000 in 2021 ($7,000 if age 50 or older) applies to your traditional and Roth IRAs, combined.
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