Traditional IRA Phaseout Range Question

[tarheeldan]

Let's say my MAGI will be 65,000 and I am filing single, so the deductibility phase out range is from 62,000 to 72,000. Does each marginal dollar contributed to a Trad IRA get the same deduction percentage?

I posted about this before but realize now I don't get it. Should I contribute all 5,500 in a Trad or is there math I can do that says it's better now to put some in a Roth?

[MDM]

Let's say my MAGI will be 65,000 and I am filing single, so the deductibility phase out range is from 62,000 to 72,000. Does each marginal dollar contributed to a Trad IRA get the same deduction percentage?

I posted about this before but realize now I don't get it. Should I contribute all 5,500 in a Trad or is there math I can do that says it's better now to put some in a Roth?

tIRA contributions do not change the MAGI on which tIRA deductibility is calculated.  See IRA Deduction Limits | Internal Revenue Service and Worksheet 1-1. Figuring Your Modified AGI.

When in the phaseout range, the amount you can deduct will be ~(72000 - X) / (72000 - 62000) * 5500, where "X" is your MAGI for tIRA purposes.

[tarheeldan]

Thank you!! I get it now, the closer MAGI gets to 72k then the more it makes sense to just switch to a Roth.

[PowderStache]

The formula given by MDM tells you the max amount if tIRA contribution you may deduct, so what you want is to make only that amount of contribution to the tIRA and contribute the remainder of the 5500 to Roth IRA.

In other words, it's not that some % of each tIRA dollar is deductible--rather every dollar up to your deductible limit is fully deductible, and the rest is not deductible at all.

[seattlecyclone]

Yep, you can fully deduct each dollar up to your own personal limit as defined by your MAGI. If your MAGI is in the exact middle of the phase-out range you can contribute $2,750 to a traditional IRA and deduct the full sum. Roth contributions would be best for the remaining $2,750.