Thank you for providing your token file. After taking a closer look I can see that the key to the reduction in your allowed Traditional IRA deduction is the Modified Adjusted Gross Income (MAGI). When one spouse is covered by a retirement plan at work, the full deduction is allowed if the MAGI is less than $123,000 as you stated in your question.
Even though your AGI is under the $123,000 limit, your MAGI is not.
The MAGI is your AGI without taking into account:
- IRA deduction.
- Student loan interest deduction.
- Foreign earned income exclusion.
- Foreign housing exclusion or deduction.
- Exclusion of qualified savings bond interest shown on Form 8815.
- Exclusion of employer-provided adoption benefits shown on Form 8839.
In your case, your MAGI is your AGI plus your IRA deduction, which puts your MAGI over the $123,000 limit and causes the partial phase-out of your deductible IRA contribution.
You can look for the IRA Worksheet that is part of your return to see the limitation as it is applied to your contribution.
For further information, see the following information from the IRS with regard to calculating the MAGI:
Modified Adjusted Gross Income for IRA deductible contributions
@tez15
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