Deductions

• You cannot deduct your contributions to a traditional IRA if you have a 401k plan, and your modified adjusted gross income (MGI) exceeds the annual limits for your filing status. These limits change each year, and you will find them in IRS Publication 590.
  
  

Calculating MGI

• Your MGI equals your adjusted gross income with certain adjustments added back in. These adjustments include deductions you took for traditional IRA contributions, student loan interest, the tuition and fees deduction and employer-paid adoption expenses.
  
  

Considerations

• If you cannot deduct your contribution to a traditional IRA, consider contributing to a Roth IRA instead where contributions are always after-tax but investment income grows tax-deferred. Roth IRAs permit you to withdraw the earnings tax-free as long as you have had the account open for at least five tax years and are at least 59 1/2 years old. Roth IRA contributions can be taken out tax-free at any time.