Can I deduct traditional IRA contributions if I have a 401(k) at work in 2025?

You can always contribute to a traditional IRA regardless of income or 401(k) participation. However, whether you can deduct that contribution on your tax return depends on your income and whether you or your spouse are covered by a workplace retirement plan.

If YOU are covered by a workplace plan (2024 income limits):

• Single/HOH: Full deduction if MAGI is $77,000 or less. Partial deduction $77,000-$87,000. No deduction above $87,000.
• MFJ: Full deduction if MAGI is $123,000 or less. Partial deduction $123,000-$143,000. No deduction above $143,000.
• MFS: Partial deduction $0-$10,000. No deduction above $10,000.

If you are NOT covered but your SPOUSE is covered:

• Full deduction if MAGI is $230,000 or less (MFJ). Partial deduction $230,000-$240,000. No deduction above $240,000.

If NEITHER spouse has a workplace plan: The deduction is available in full at any income level.

Nondeductible IRA contributions: If you exceed the income limits, you can still make nondeductible contributions (up to $7,000 for 2024, $8,000 if 50+). File Form 8606 to track your basis in nondeductible contributions. This prevents double taxation when you withdraw the funds later.

Better alternative - Backdoor Roth: If you cannot deduct traditional IRA contributions, consider the backdoor Roth IRA strategy. Make a nondeductible traditional IRA contribution, then immediately convert to a Roth IRA. You pay little to no tax on the conversion (just on any earnings between contribution and conversion). Beware the pro-rata rule if you have existing pre-tax IRA balances.

Contribution deadline: IRA contributions for the 2024 tax year can be made until April 15, 2025 (the tax filing deadline, with no extension).