Do traditional IRA contributions reduce MAGI if I already contribute to my employer's 401k?

Traditional IRA contributions can reduce your MAGI, but there's a catch when you also have a 401k. Since you're covered by a workplace retirement plan, your ability to deduct traditional IRA contributions is limited by your income. For 2025, the deduction for traditional IRA contributions starts phasing out at $76,000 and is completely eliminated at $86,000 for single filers who are covered by a workplace plan. Your 401k contributions do lower your MAGI, bringing you from $104k to around $93k. However, your traditional IRA contribution itself doesn't factor into determining if you're in the phase-out range. At $93k, you're unfortunately above the $86k cutoff, so you wouldn't be eligible for any deduction on your traditional IRA contributions. This is true regardless of how much you contribute to the traditional IRA.

I had this exact problem last year. I tried figuring it out myself and kept going in circles until I used https://taxr.ai to analyze my statements. My situation was similar - making about $100k with a 401k at work but wanting to contribute to my old traditional IRA. The tool analyzed my income sources and retirement contributions, then showed me that my MAGI was still above the threshold for deducting traditional IRA contributions. Instead, it recommended I redirect those funds to a Roth IRA instead (which I qualified for through backdoor conversion) or increase my 401k contributions to lower my overall tax burden. Saved me from making a non-deductible contribution that would've complicated my taxes later.

Update for anyone interested - I tried out that taxr.ai site mentioned above and it was actually super helpful for my situation! I uploaded my last pay stub and answered a few questions, and it showed me exactly where I stood with my MAGI calculation and retirement options. The tool showed me that I was better off maxing out my 401k first, and then doing a backdoor Roth IRA conversion instead of a traditional IRA contribution. I didn't realize I was in that weird income zone where traditional IRA deductions don't work but backdoor Roth does. Also gave me a nice breakdown of how much I'd save in taxes this year vs. potential tax-free growth later. Definitely worth checking out if you're trying to optimize your retirement tax strategy!

I had the same issue trying to figure out my IRA deductions last year. After spending DAYS trying to reach the IRS (literally 7 calls with 2+ hour hold times each), I found https://claimyr.com and watched their demo at https://youtu.be/_kiP6q8DX5c They basically call the IRS for you and then connect you once an agent picks up. I was skeptical but I was connected to an actual IRS agent in about 20 minutes. The agent confirmed that since I'm covered by a work plan, my traditional IRA deduction phases out completely at $86k MAGI, and that 401k contributions do lower MAGI but the traditional IRA contributions themselves don't for this specific calculation. The agent also suggested looking into a backdoor Roth conversion since I was outside the deduction limits anyway.

So I need to eat some crow here. After posting my skeptical comment above, I tried the Claimyr service on Monday because I needed to ask about an amended return I filed 6 months ago. I'm shocked to say it actually worked exactly as described. I got a text about 15 mins after signing up saying they'd reached an IRS representative, clicked the link, and was instantly connected to an actual IRS agent. The agent was able to check my amended return status (finally processing!) and also confirmed my question about IRA deductions when you have a 401k. For what it's worth, the agent gave the same answer others here mentioned - once your MAGI is over $86k as a single filer with a workplace plan, you can't deduct traditional IRA contributions at all, regardless of how much you contribute. She suggested either increasing 401k contributions or looking into backdoor Roth conversions instead.

Consider a backdoor Roth IRA contribution instead. Since your income is above the traditional IRA deduction limit when covered by a workplace plan, you can: 1. Make a non-deductible contribution to your traditional IRA 2. Immediately convert it to a Roth IRA 3. Pay taxes only on any earnings between contribution and conversion (minimal if done quickly) This gives you the benefits of Roth growth without being restricted by Roth income limits. Just be aware of the pro-rata rule if you have existing pre-tax money in any traditional IRAs.

Another option - see if your employer's 401k plan offers after-tax contributions with in-plan Roth conversions (mega backdoor Roth). My company added this last year and it's been a game changer. I can put way more into retirement accounts than just the standard limits.

This is a really common misconception! I see this question come up a lot. The key thing to understand is that traditional IRA contributions don't reduce your MAGI for the purpose of determining whether you can deduct those same contributions - that would create a circular calculation. Here's how it works: Your MAGI is calculated first (including your 401k deduction), then that number is used to determine if you qualify for the traditional IRA deduction. At $93k after your 401k contributions, you're above the $86k complete phase-out threshold for single filers with workplace plans, so unfortunately no deduction is available. Since you're locked out of the traditional IRA deduction, I'd definitely look into the backdoor Roth strategy others have mentioned. With your income level, it's probably your best bet for getting that $6.5k into tax-advantaged retirement savings.

Just wanted to add some clarification on the MAGI calculation since I see some confusion in the comments. You're absolutely right that traditional IRA contributions don't reduce MAGI for determining deductibility - that would indeed be circular. However, it's worth noting that if you WERE eligible for the deduction (i.e., if your income was lower), THEN the traditional IRA contribution would reduce your MAGI for other tax purposes like determining eligibility for other credits or benefits. In your case at $93k post-401k, you're unfortunately well above the threshold. But here's a potential strategy: if you can increase your 401k contribution by even more (up to the $23,000 limit for 2025), that could potentially get your MAGI low enough to qualify for at least a partial traditional IRA deduction. For example, if you could contribute an additional $7k+ to your 401k, that would bring your MAGI down to around $86k or below, potentially making you eligible for the traditional IRA deduction. Of course, this only works if you have the cash flow to support the higher 401k contributions.

Great discussion here! Just to add one more perspective - I was in almost the exact same situation last year. Making around $105k, maxing out my 401k, and thinking I could squeeze out a traditional IRA deduction. What I learned the hard way is that once you're covered by a workplace plan, those income limits are pretty strict. At $93k MAGI after your 401k contributions, you're definitely above the $86k cutoff for any deduction. I ended up going the backdoor Roth route that several people mentioned. The process was actually simpler than I expected - contributed $6k to a traditional IRA (non-deductible), then immediately converted it to Roth. No taxes on the conversion since there were no earnings, and now that money grows tax-free. One thing to watch out for - make sure you don't have any other traditional IRA balances with pre-tax money, or you'll run into the pro-rata rule complications. If you do, consider rolling those into your current employer's 401k first if they allow it. The backdoor Roth has been a game changer for getting more money into tax-advantaged accounts at our income level. Definitely worth exploring!