Roth and Traditional IRA Contribution Limits

Individual Retirement Arrangements, or IRAs, are a common vehicle for personal retirement savings that operate under rules from the Internal Revenue Service (IRS). They allow individuals with earned income to set aside money that can grow with tax advantages. The two most prevalent types are the Traditional IRA and the Roth IRA, each with distinct features for tax treatment of contributions and withdrawals. The IRS sets specific annual limits on contributions, which can be adjusted for inflation, and adhering to them is necessary to avoid tax penalties.

The Overall Annual IRA Contribution Limit

For the tax years 2024 and 2025, an individual can contribute a maximum of $7,000 to all of their IRAs. This limit is not per account but is a total cap that applies to the combined contributions made to both Traditional and Roth IRAs. For example, if a person contributes $3,000 to a Traditional IRA, they can only contribute up to $4,000 to a Roth IRA in the same year.

The tax code includes a provision for individuals who are closer to retirement age. Savers age 50 and over are permitted to make an additional “catch-up” contribution. For 2024 and 2025, this additional amount is $1,000, bringing the total possible contribution for this age group to $8,000 per year.

Contributions for a specific tax year can be made from January 1 of that year until the federal income tax filing deadline of the following year, which is around April 15. This allows individuals to make contributions for the previous year right up until they file their taxes without needing an extension.

Income Limits for Roth IRA Contributions

The ability to contribute to a Roth IRA is constrained by income. These thresholds are based on the taxpayer’s Modified Adjusted Gross Income (MAGI), which is the Adjusted Gross Income (AGI) from a tax return with certain deductions added back. As a person’s income rises, their eligibility to make Roth contributions may be reduced or eliminated.

For the 2025 tax year, a single individual can make a full contribution if their MAGI is less than $150,000. The contribution amount is gradually reduced if their MAGI falls within the phase-out range of $150,000 to $165,000. Individuals with a MAGI of $165,000 or more are not eligible to contribute to a Roth IRA for that year.

For those who are married and file their taxes jointly, the income limits are higher. In 2025, a married couple filing a joint return can make a full contribution if their combined MAGI is below $236,000. The phase-out range for joint filers is between $236,000 and $246,000. If their MAGI exceeds $246,000, they cannot contribute to a Roth IRA.

Income Limits for Deducting Traditional IRA Contributions

Anyone with sufficient earned income can contribute to a Traditional IRA, regardless of how high their income is. However, the ability to deduct that contribution from taxable income is determined by the taxpayer’s MAGI and whether they or their spouse are covered by a workplace retirement plan, such as a 401(k).

If an individual is covered by a workplace retirement plan, their ability to deduct Traditional IRA contributions is subject to income phase-outs. For 2025, a single filer covered by a workplace plan will see their deduction phased out if their MAGI is between $79,000 and $89,000. For those married filing jointly where the contributing spouse is covered by a workplace plan, the phase-out range is $126,000 to $146,000.

If an individual is not covered by a workplace retirement plan, their Traditional IRA contribution is fully deductible, regardless of income. A different rule applies to a spouse who is not covered by a workplace plan but is married to someone who is. For 2025, the deduction for the non-covered spouse is phased out if the couple’s joint MAGI is between $236,000 and $246,000. Even if a contribution is not deductible, it can still be made as a non-deductible contribution and must be reported on IRS Form 8606.

Addressing Excess Contributions

Contributing more to an IRA than is legally allowed results in an excess contribution. This overage is subject to a 6% excise tax for each year it remains in the account. This tax is calculated and reported on IRS Form 5329.

To fix this error and avoid the penalty, you can withdraw the excess contribution and any investment earnings it generated before the tax filing deadline, including extensions. The withdrawn earnings must be reported as taxable income for that year. These earnings may also be subject to a 10% early withdrawal penalty if the account holder is under age 59 ½.

If the mistake is found after the tax deadline, the excess amount can still be withdrawn to prevent the 6% penalty in future years, though the penalty for the year of the excess will still apply.

Another option is to apply the excess contribution to a subsequent year’s contribution limit. For instance, an excess of $1,000 from one year can be used as part of the contribution for the next year, as long as the total does not exceed the annual limit. This method avoids withdrawing funds but does not negate the 6% tax for the year the excess first occurred.