Not getting Tax credit for traditional IRA amount

[Sam Khan]

Why I am not getting full tax credit the money that I deposit to my traditional IRA account? I can deduct only $300  of the contribution. I don't have a retirement plan with my company I do have 401K option. Also I am within my gross income range $109K to $129K  not over $129K bit less than the max range. Any idea why I am just getting tax credit for $300 not for $7K? Do I need to go for Roth IRA?

[MaryK4]

Your traditional IRA contributions may be tax-deductible. The deduction may be limited if you or your spouse is covered by a retirement plan at work and your income exceeds certain levels.

See IRA Deduction if You Are NOT Covered by a Retirement Plan at Work - 2022 (deduction is limited only if your spouse IS covered by a retirement plan) and IRA Deduction if You ARE Covered by a Retirement Plan at Work - 2022.

[Sam Khan]

So I am not getting the tax credit because my gross salary is between $109K and $129K and I have a 401K plan from the company? 

[MaryK4]

Yes, if your employer has an established retirement plan, your deduction is limited, even if you do not participate at work.

You’re covered by an employer retirement plan for a tax year if your employer (or your spouse’s employer) has a:

Defined contribution plan (profit-sharing, 401(k), stock bonus and money purchase pension plan) and any contributions or forfeitures were allocated to your account for the plan year ending with or within the tax year;

IRA-based plan (SEP, SARSEP or SIMPLE IRA plan) and you had an amount contributed to your IRA for the plan year that ends with or within the tax year; or

Defined benefit plan (pension plan that pays a retirement benefit spelled out in the plan) and you are eligible to participate for the plan year ending with or within the tax year.

@Sam Khan

[Sam Khan]

Thank you @MaryK4 .

[Sam Khan]

One more question. Can I still contribute a max amount for IRA? 

I think Roth IRA would be a good choice since I am not getting any tax credit right. 

[MayaD]

There are no income limits for Traditional IRA contribution. 

However, your contribution to a Roth IRA is affected by the amount of your modified AGI. 

You can check if you can make the max Roth IRA contribution based on your filling status and your modified AGI from the link below:

Amount of Roth IRA Contributions That You Can Make for 2022