An Individual Retirement Arrangement (IRA) is a tax‑favored personal savings vehicle that allows individuals to set aside money for retirement. Taxpayers may contribute to traditional IRAs or Roth IRAs, subject to annual limits and eligibility rules.
IRA Contribution Deadline
A taxpayer may contribute to a traditional or Roth IRA:
- Anytime during the tax year
- Up to the return due date (April 15 for most taxpayers), not including extensions
Contributions made by the deadline may be designated for either the prior year or the current year.
Taxpayers may withdraw contributions before the return due date if:
- They do not claim a deduction for the contribution
- They include any net income attributable (positive or negative) in income
Compensation for IRA Purposes
To contribute to an IRA, the taxpayer or spouse must have taxable compensation.
Compensation Includes
- Wages, salaries, tips
- Bonuses, professional fees
- Self‑employment income (net earnings reduced by SE tax deduction and retirement plan contributions)
- Taxable alimony
- Nontaxable combat pay
Compensation Does NOT Include
- Rental income, interest, dividends
- Pension or annuity income
- Deferred compensation
- Income from a partnership where personal services are not a material factor
- Excluded income (except combat pay)
IRA Contribution Limits (2025)
The total annual contribution to all IRAs (traditional + Roth) cannot exceed:
- $7,000
- $8,000 if age 50 or older (includes $1,000 catch‑up)
- 100% of taxable compensation, if lower
The limit does not apply to rollovers.
There is no age limit for making IRA contributions.
Spousal IRA Contributions
A taxpayer filing jointly may contribute to an IRA for a spouse with little or no compensation.
For 2025, the contribution limit for the lower‑earning spouse is the smaller of:
- $7,000 (or $8,000 if age 50+)
- Combined taxable compensation minus the other spouse’s IRA contributions
Spousal Roth IRA contributions may be limited by MAGI; spousal traditional IRA contributions are not limited by income.
Roth IRA Contribution Limit
Roth IRA contributions are never deductible.
The general IRA contribution limit applies, but Roth contributions may be reduced or eliminated based on MAGI and filing status.
2025 Roth IRA MAGI Phase‑Out Ranges
- MFJ/QSS: $236,000–$246,000
- Single/HOH/MFS (did not live with spouse): $150,000–$165,000
- MFS (lived with spouse): $0–$10,000
Above the upper limit, Roth contributions are not allowed.
Excess Contributions
Contributions above the allowable limit are excess contributions.
To avoid the 6% excise tax:
- Withdraw the excess by the return due date, including extensions
- Withdraw any earnings on the excess
- Include earnings in income for the year the excess was made
Traditional IRA Deduction Limit
Traditional IRA contributions may be deductible, but the deduction may be limited if:
- The taxpayer or spouse is covered by an employer retirement plan, and
- MAGI exceeds certain thresholds
2025 Deduction Phase‑Out (Taxpayer Covered by a Plan)
- Single/HOH: $79,000–$89,000
- MFJ/QSS: $126,000–$146,000
- MFS: $0–$10,000
If Taxpayer Is NOT Covered but Spouse IS
- MFJ: $236,000–$246,000
- MFS: $0–$10,000
Deduction Calculation
If MAGI is within the phase‑out range:
- MFJ/QSS: deduction = 27.5% (32.5% if age 50+) × (upper limit − MAGI)
- All others: deduction = 55% (65% if age 50+) × (upper limit − MAGI)
Nondeductible Traditional IRA Contributions
If the deduction is limited or eliminated, taxpayers may still contribute up to the annual limit.
The nondeductible portion:
- Increases the basis in the IRA
- Is not taxable when withdrawn
- Must be reported on Form 8606
Failure to file Form 8606 causes the IRS to treat all contributions as deductible, making future distributions fully taxable.