Q: I read that the new GOP tax plan cut or eliminated many key deductions. What about my IRA and 401(k) deductions?
It's true that the GOP tax bill cut several deductions. In addition, the higher standard deduction means that fewer people will actually be able to take advantage of common tax breaks for things like mortgage interest and charitable contributions.
However, one piece of good news is that tax breaks for retirement savings were completely left alone. The deduction for traditional IRA contributions, as well as the deductibility of other types of pre-tax retirement contributions -- such as to a 401(k), 403(b), 457, or Thrift Savings Plan -- were untouched by the legislation. Even the increased catch-up contributions for savers 50 and older, which were on the chopping block in earlier versions of the Republican proposal, survived intact.
The Retirement Savings Contribution Credit, also known as the "Saver's Credit" also remains in place, with the same income limits that the IRS previously announced.
The deduction for traditional IRA contributions is an "adjustment to income," also known as an "above-the-line" deduction, rather than a deduction in the traditional sense. This means that you can take advantage of it even if you don't itemize, as long as you qualify.
So, although the removal of and reduction of some previously common tax deductions, combined with the new higher standard deductions will ensure that itemizing won't be worthwhile for 94% of taxpayers, it won't affect your ability to get a tax break for your traditional IRA contributions.