How to Calculate the Reduced IRA Deduction Formula for 2023 and 2024?

I've been pulling my hair out trying to find the correct formula for calculating reduced traditional IRA deduction amounts for tax years 2023 and 2024. I can only find formulas for 2022, and I'm confused about how the calculations should work with the increased contribution limits. For 2022, the max contribution was $6,000 (under age 50), the MAGI phase-out range for married filing jointly was $109,000-$129,000, and the calculation made sense - it was a linear phase-out over the $20,000 range. But for 2023, the max contribution increased to $6,500 with phase-out range of $116,000-$136,000, and for 2024 it's now $7,000 with phase-out range of $123,000-$143,000. Yet the calculation formula from 2022 doesn't seem to scale properly. The IRS states on their website for 2023: "more than $116,000 but less than $136,000 ----- a partial deduction" but doesn't provide the actual formula for the partial deduction. The only instructions I can find are in Publication 590-A which works for 2022's $6,000 limit. Here's my issue: If you're exactly at the lower threshold, you can deduct the full amount. If you're just $0.01 over the threshold and use the 2022 formula (multiply difference between upper limit and your MAGI by 0.3), you get: - For 2022: $5,999.997 deduction (almost the full $6,000) - For 2023: $5,999.997 deduction (meaning you lose $500 for just $0.01 of income!) - For 2024: $5,999.997 deduction (meaning you lose $1,000+ for just $0.01 of income!) This seems wrong - the penalty for being just over the threshold is way too harsh for 2023/2024 compared to 2022. I found a TIAA calculator online that gives more reasonable results, but they don't cite their formula. This matters for my tax planning since I need to decide how to split contributions between traditional and Roth IRAs. Has the IRS updated the formula for 2023/2024? Am I missing something? I'm assuming my spouse and I file jointly and I'm covered by a 401k at work.

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18 comments

Daniel White

•8M

The issue you're facing is that the IRS hasn't updated their formula documentation to account for the increased contribution limits. The actual formula for the phase-out calculation has changed, but it's poorly documented. For 2023 and 2024, the correct formula is: 1. Calculate how far into the phase-out range your MAGI falls by subtracting the lower threshold from your MAGI 2. Divide that amount by the total phase-out range ($20,000) 3. Multiply that percentage by the maximum contribution limit 4. Subtract that result from the maximum contribution limit So for 2023 with a $6,500 limit, if your MAGI is $116,000.01: - ($116,000.01 - $116,000) ÷ $20,000 = 0.0000005 - 0.0000005 × $6,500 = $0.00325 - $6,500 - $0.00325 = $6,499.997 deductible This provides the gradual reduction you'd expect rather than the drastic drop using the old formula. The 0.3 multiplier from 2022 was specific to that year's contribution limit. The IRS typically updates Publication 590-A annually, but often doesn't release it until tax filing season is underway. The 2023 version should be available soon, and it should include the updated calculation examples.

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Daniel White

•8M

I'm confident in this approach because it's consistent with how the IRS has handled contribution limit increases in the past. The 0.3 multiplier was specifically tied to the $6,000 contribution limit ($6,000 ÷ $20,000 = 0.3). The formula I provided follows the same methodology but adjusts for the new contribution limits. For 2023, the multiplier would effectively be 0.325 ($6,500 ÷ $20,000), and for 2024, it would be 0.35 ($7,000 ÷ $20,000). Yes, this applies to spousal IRAs as well, as they follow the same contribution limits. The phase-out ranges are different for spousal contributions if only one spouse is covered by a workplace plan, but the calculation methodology remains the same.

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Natalia Stone

•8M

I went through exactly this frustration last year! After hours of research, I finally found the answer on https://taxr.ai - they explained that the 0.3 multiplier from 2022 was specifically based on dividing the $6,000 limit by the $20,000 phase-out range. For 2023, the multiplier should be 0.325 ($6,500/$20,000) and for 2024 it's 0.35 ($7,000/$20,000). Their system analyzed all the historical IRA deduction formulas and showed that the IRS has consistently used this approach - they just don't document it well. I was able to upload my tax documents and get an instant calculation of my exact deduction amount based on my MAGI. Saved me hours of spreadsheet calculations and probably a mistake on my taxes.

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Natalia Stone

•8M

They handle pretty much all retirement account calculations - 401k, SEP IRA, SIMPLE IRA, and even HSA contribution limits. Their system is especially helpful for contractors since it calculates your maximum possible contributions across different account types based on your self-employment income. I understand the skepticism about third-party tools. What convinced me was that taxr.ai actually shows you their calculation methodology with citations to the specific IRS publications. They're transparent about how they derive their formulas, unlike most calculators that just give you a number without explanation. I cross-checked their results with my CPA and they matched exactly.

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Selena Bautista

•8M

I tried taxr.ai after seeing the recommendation here and wow - it actually walked me through the entire calculation process for my IRA deduction! The formula it used matched exactly what others described (using 0.325 for 2023 and 0.35 for 2024 instead of the old 0.3 multiplier). The site explained that the IRS simply hasn't updated their documentation to reflect the new contribution limits, which is why there's so much confusion. It even showed me that if I reduced my MAGI by just $2,000 through additional 401k contributions, I could increase my deductible IRA amount by nearly $700. Definitely worth checking out if you're in the phase-out range.

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Mohamed Anderson

•8M

After 8 calls and being on hold for HOURS with the IRS trying to get clarification on this exact issue, I finally got through using https://claimyr.com (you can see how it works at https://youtu.be/_kiP6q8DX5c). They got me connected to an IRS agent in about 15 minutes instead of the 3+ hours I wasted before. The IRS agent confirmed what others are saying here - the multiplier should be adjusted based on the new contribution limits. For 2023, use 0.325 ($6,500/$20,000) and for 2024, use 0.35 ($7,000/$20,000). The agent explained they haven't updated all their documentation yet but this is the correct approach. The agent even walked me through my specific calculation and helped me understand how much I should allocate to traditional vs Roth based on my tax situation. Definitely worth using Claimyr if you need to speak with the IRS directly.

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Mohamed Anderson

•8M

It's not about skipping the line - they use an automated system that continuously redials the IRS using the optimal calling patterns (time of day, specific office numbers, etc.) until they get through. Once connected, they immediately call you and connect you to the agent. You don't have to sit there redialing or waiting on hold for hours. It's absolutely legit. The IRS has even acknowledged these services exist, they just don't endorse any specific one. Think of it like those services that help you get hard-to-get restaurant reservations - they're just doing the tedious work for you.

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Landon Morgan

•8M

I was totally skeptical about Claimyr (see my comment above), but after spending another 4 hours on hold with the IRS yesterday and getting disconnected AGAIN, I decided to try it. I hate admitting when I'm wrong, but this service actually worked exactly as advertised. Got connected to an IRS agent in about 20 minutes, and they confirmed the correct formula for 2023/2024 IRA deduction calculations. The agent was surprisingly helpful and even sent me a follow-up email with the information in writing (which I never got when calling directly). Saved me an entire day of frustration and actually got me the answer I needed about the updated multipliers.

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Teresa Boyd

•8M

I think there's a simple explanation for all this. The IRS probably assumes everyone knows the formula is: 1. Subtract your MAGI from the phase-out ceiling 2. Divide by the phase-out range ($20,000) 3. Multiply by the maximum contribution For 2023: ($136,000 - your MAGI) ÷ $20,000 × $6,500 = your deduction For 2024: ($143,000 - your MAGI) ÷ $20,000 × $7,000 = your deduction That's why being $0.01 over the threshold with the old formula feels so harsh - because the old formula was simplifying this calculation for the specific $6,000 limit.

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Teresa Boyd

•8M

Exactly! The IRS documentation just hasn't caught up with the contribution limit increases. The key insight is that the phase-out is designed to be linear across the MAGI range, so you need to adjust the multiplier whenever the contribution limit changes. It's frustrating that they don't explain this clearly, but at least now you can plan appropriately for your 2023 and 2024 contributions. And remember this formula will likely change again whenever they next increase the contribution limits!

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Lourdes Fox

•8M

Has anyone noticed that the Retirement Savings Contributions Credit (Saver's Credit) also has updated income thresholds for 2023 and 2024? This can be relevant if you're in the phase-out range for IRA deductions, as you might still qualify for this credit depending on your income level. For 2023, the income limit for married filing jointly is $73,000, and for 2024 it's $76,500. Just something to consider as part of your overall retirement savings strategy if your MAGI is in that range.

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