I have a 401k from a previous employer. I am no longer with the company since last year. Can I deduct my traditional IRA contributions from my taxes this year?

[watch131719]

I got a bonus from my past employer for last year that was paid this year. My understanding is that this is considered earned income for this year. I like to contribute this earned income to a traditional IRA for this year. I like to know if I can deduct this contribution from my taxes for this year.

[Opus 17]

If you "participated" in an employer's plan for even 1 day in 2025, then you must follow the deductibility rules for plan participants.  Ultimately, it will come down to whether or not the employer checks the box for "retirement plan" in box 13 of your W-2.  Did the company contribute to the 401k in 2025 based on the bonus (your voluntary deferrals, or their contribution, or both)?  

https://www.irs.gov/retirement-plans/ira-deduction-limits

Separately, if you have W-2 box 1 income, that is considered compensation for working (including a bonus paid after you stopped working but was earned by working previously), and compensation is required for you to contribute to an IRA.  So if you had no other job in 2025 and the bonus is your only compensation, you can use it to make an IRA contribution.  The issue of whether or not it is deductible depends on your income, filing status, and whether you were covered by a retirement plan at work. 

[dmertz]

If the plan uses a fiscal year, it's possible that participation in 2024 could make you covered for 2025.  For example, if the plan uses a fiscal year ending June 30, you separated from service in September 2024 while having made deferrals to the plan from your pay though the date that you separated from service, you would be covered for 2025 because additions were made for the plan year that ends on June 30, 2025.

However, because you were not employed with the company in 2025, you will not be receiving any 2025 Form W-2 that would be marked to indicate that you were covered by a retirement plan.  To truly know if you were covered for 2025, you would need to find out from the plan whether additions were made to your account for the plan year that ended in 2025.