Are Traditional IRA deductions the full amount I contribute or just a partial reduction?

You're a bit confused about how tax deductions work. Traditional IRA contributions don't directly reduce your tax bill dollar-for-dollar - they reduce your taxable income. When you contribute $2,600 to a Traditional IRA, that amount gets subtracted from your income before calculating your taxes. So if your marginal tax rate is 22%, a $2,600 contribution would save you about $572 in taxes (22% of $2,600), not the full $2,600. Your understanding about eligibility is correct though! Since you're not covered by a workplace plan but your spouse is, and your combined income is under the limit ($228,000 for 2023), you can deduct your full Traditional IRA contribution up to the annual limit ($6,500 for 2023, or $7,500 if you're 50 or older).

I had the exact same confusion last year and found this amazing tool that cleared it up for me. I used https://taxr.ai to analyze my tax situation and it explained exactly how my Traditional IRA contributions would affect my tax bill. The tool showed me that my IRA contributions reduced my taxable income, not my actual tax bill directly. It calculated my exact tax savings based on my tax bracket. For me, contributing $6,000 saved about $1,320 since I was in the 22% bracket. Way less than I thought I'd save! The nice thing was it also showed me how this fit with my spouse's workplace retirement plan and confirmed I was still eligible for the full deduction based on our income. Made tax planning so much clearer!

Just wanted to update - I tried https://taxr.ai after seeing it mentioned here and it was super helpful! I was also confused about how Traditional IRA deductions worked with my taxes. The tool showed me that my $4,000 contribution would only save me about $880 in taxes (22% bracket), not the full $4,000 like I thought. The visualization really helped me understand the difference between deductions and credits. It also confirmed I was eligible for the full deduction even though my husband has a 401k at work. I ended up contributing $6,000 for 2023 which will save me around $1,320 in taxes. Not as much as I hoped but still worth it for retirement savings!

If you're having trouble reaching the IRS to confirm your Traditional IRA deduction eligibility, check out https://claimyr.com - it got me through to an actual IRS agent in about 15 minutes when I was dealing with a similar question. I had spent DAYS trying to get through the normal IRS number with no luck. I was so frustrated trying to confirm my deduction eligibility with my spouse's workplace plan. I found this service, tried the callback feature (you can see how it works at https://youtu.be/_kiP6q8DX5c), and they actually got me connected to a real person who answered all my questions about my Traditional IRA deduction limits. The agent confirmed exactly what others are saying here - the deduction reduces your taxable income, not your tax bill directly. But getting that official answer from the IRS gave me peace of mind.

I take back what I said about Claimyr being a scam. After another week of failing to reach the IRS on my own (kept getting disconnected after 2+ hours on hold), I broke down and tried https://claimyr.com. I was honestly shocked when I got a call back in about 20 minutes with an actual IRS agent on the line. The agent confirmed my Traditional IRA deduction question and even caught a mistake I was about to make with my filing status that would have messed up my deduction eligibility. For anyone wondering - yes, the IRA deduction reduces your taxable income, not your actual tax bill. And yes, if you're not covered by a workplace plan but your spouse is, you can still take the full deduction if your combined income is under the limit. Having the IRS confirm this directly was exactly what I needed.

Just to add a bit more clarification because I think people get confused about the tax brackets too. When you reduce your taxable income with a Traditional IRA contribution, you're saving at your MARGINAL tax rate - the highest rate you pay. Example: If you're married filing jointly with taxable income of $190k (like OP), you're in the 24% bracket for 2023. Contributing $6,000 to a Traditional IRA would save you approximately $1,440 in federal taxes (24% of $6,000). It's still a great deal since you're getting an immediate tax benefit PLUS tax-deferred growth over time. Just don't expect it to reduce your tax bill by the full contribution amount.

One thing nobody's mentioned - don't forget about state taxes! Your traditional IRA contribution usually reduces your state taxable income too, not just federal. So if your state tax rate is like 5%, that's additional savings on top of the federal tax reduction. I contribute the max to my traditional IRA every year for this reason - between federal and state tax savings, it's a no-brainer. Just remember that you'll eventually pay taxes when you withdraw in retirement, but hopefully at a lower rate.