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Tax software is stating that I am able to take Trad IRA with deduction. This seems odd as I contributed max amount to employer provided 401k. I was under the impression that fully contributing to 401k meant Trad IRA contribution would no longer be tax deductible.

Under what financial circumstances could 401k and Trad IRA contributions both be tax deductible? What worksheet should I be looking at?

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    Having employer sponsored plan doesn't preclude IRA deduction, but affects the deduction eligibility limits
    – littleadv
    Mar 30, 2023 at 22:11
  • Does your W-2 have the "retirement plan" box checked?
    – user102008
    Apr 1, 2023 at 18:37
  • If your income is really low enough to be able to deduct a Traditional IRA contribution despite being covered by a retirement plan at work, your tax bracket must be low so it may make more sense to contribute to a Roth IRA/Roth 401k instead of Traditional IRA/Traditional 401k.
    – user102008
    Apr 1, 2023 at 18:38

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IRA Deduction Limits - since you're participating in an employer plan, you're subject to income limits based on your filing status. For 2022, the deductibility phaseout ranges are for modified AGI of $68,000-$78,000 single, $109,000-$129,000 MFJ, and $0-$10,000 MFS.

Worksheet 1-1 on Pub 590 will help you calculate your modified AGI for traditional IRA deductibility.

Note that pre-tax 401k, FSA, and HSA contributions reduce your gross income and therefore also reduce MAGI, so hypothetically, if your salary was $85,000 in 2022 and you contributed $20,000 to your 401k, your MAGI (assuming no other income/deductions) would be $65,000 and therefore under the single filer limit.

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    Yep, maxing out 401k pulls salary low enough to allow IRA deduction.
    – paulj
    Mar 31, 2023 at 18:50

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