Anyone with earned income (meaning income from work rather than investments) can contribute to a traditional IRA, but not everyone who contributes can claim a tax deduction. That’s a no-no for the rich if they’re covered by a retirement plan at work.
Here’s how the deduction rules operate for traditional IRAs: First, there’s a limit on how much you can contribute each year—$5,500 ($6,500 if you’ll be at least 50 years old by the end of the year) or 100% of your earned income, whichever is less. If you’re not enrolled in a 401(k) or some other workplace retirement plan, you can deduct your IRA deposits no matter how high your income. But if you’re enrolled in such a plan, the right to the IRA deduction is phased out as 2017 income rises between $62,000 and $72,000 on a single return or between $99,000 and $119,000 if you’re married and file jointly with your spouse. (For 2018, the deduction phases out for income between $63,000 and $73,000 for singles and between $101,000 and $121,000 for couples.) The limits only apply if one spouse participates in an employer plan. If neither does, there are no income limits for taking a deduction.
Spouses with little or no earned income can also make an IRA contribution of up to $5,500 ($6,500 if 50 or older) as long as the other spouse has sufficient earned income to cover both contributions. For 2017, the contribution is tax-deductible as long as income doesn’t exceed $186,000 on a joint return. You can take a partial tax deduction if your combined income is between $184,000 and $194,000. (For 2018, the contribution is tax-deductible as long as income doesn’t exceed $189,000 on a joint return; you can take a partial tax deduction if your combined income is between $189,000 and $199,000.)
