Do I qualify for Traditional IRA tax deduction?

Question

I am looking at the link here to be able to figure out if i qualify for tax deduction in traditional IRA.

https://www.wellsfargo.com/investing/retirement/ira/traditional-or-roth-ira/traditional/

on Am I eligible tab and I have couple of questions

1. it says "During the 2015 tax year, one spouse is covered by an employer sponsored plan and one isn't". What does covered mean? If I am contributing for 401k then I am covered and if I am not contributing then I am not covered?
2. If so, it almost sounds like contributing small amounts to 401k is really bad deal because it Not only reduces my IRA eligibility by almost 70k but I am also not reaping benefits of full tax deduction by fully contributing into 401k. Is my conclusion correct?
3. It also means that if(hypothetically) my combined income is more than 230k, and even though both husband and wife are fully contributing to 401k (18k each), still there is no way to qualify for IRA tax deduction because according to the link above the combined income(after 401k contribution) has to be 183k. Is that correct?

Answer 1

1. Yes, for 401k, that is correct. Specifically, if you contribute or your employer contributes (though in most cases employers only contribute if you contribute so it's mostly the same as saying if you contribute).

2. Yes. But then why are you not contributing more into your 401k? You just have to make up your mind to do your planned pre-tax contributions for each year all to IRAs or all to 401ks.

3. No. In the case where you are contributing to the 401k (and are thus covered by an employer retirement plan), and I'm assuming you're filing as Married Filing Jointly, your AGI would have to be below $98k to get a full IRA deduction. I think your $184k number is from the case where you're not covered by an employer plan, but your spouse is, and you're filing jointly.