An individual retirement arrangement (IRA) is a personal retirement account that can offer tax advantages, but the rules depend on what type of IRA you use, your income, and whether you (or your spouse) are covered by a workplace retirement plan.
1) The annual contribution limit (and what it’s based on)
For 2025, the combined total you can contribute across all your traditional and Roth IRAs is generally the lesser of:
- $7,000 (or $8,000 if you’re 50+), or
- your taxable compensation for the year.
What counts as “taxable compensation”?
In plain terms, it’s typically wages and other pay for work (the kind that shows up as taxable pay). Certain graduate/postdoctoral fellowship and stipend payments can also count as taxable compensation for IRA purposes under specific rules.
Spousal IRA (for couples filing jointly)
If you file a joint return and one spouse has little or no compensation, you may still be able to fund an IRA for the nonworking/low-earning spouse under the spousal IRA rules (as long as the couple has enough combined compensation).
No age cutoff for traditional IRA contributions
The older rule that prevented traditional IRA contributions after a certain age is no longer in effect, meaning contributions may still be allowed later in life if you have eligible compensation.
2) When you can contribute for a tax year
You can generally make IRA contributions for a given year during that year and up to the tax-filing deadline for that year (traditional and Roth both follow this general timing, but pay attention to how extensions are treated for different actions).
3) Traditional IRA: whether your contribution is deductible
A key feature of a traditional IRA is that you may be able to deduct some or all of your contribution. The deductible amount can depend on:
- your filing status,
- your modified AGI, and
- whether you (or your spouse) are covered by a workplace plan.
2025 deduction phaseouts if you’re covered by a plan at work
If you’re covered by a workplace retirement plan, your deduction can be reduced or eliminated based on modified AGI. For 2025, the key ranges shown include:
- Single/Head of household: full deduction at $79,000 or less, partial between $79,000–$89,000, none at $89,000 or more.
- Married filing jointly / qualifying surviving spouse: full deduction at $126,000 or less, partial between $126,000–$146,000, none at $146,000 or more.
- Married filing separately: partial if under $10,000, none at $10,000 or more.
If you aren’t covered by a plan—but your spouse is
There are separate thresholds that can phase out your deduction when you’re not covered at work but your spouse is.
4) Roth IRA: income limits matter, and contributions aren’t deductible
Roth IRA contributions are never deductible.
Instead, eligibility is based on compensation and your modified AGI.
2025 Roth IRA income phaseouts (high-level)
For 2025, your allowed Roth IRA contribution is reduced (phased out) and eventually disallowed at the following modified AGI levels:
- Married filing jointly / qualifying surviving spouse: phaseout starts at $236,000; no Roth contribution at $246,000 or more.
- Single / head of household / married filing separately (and lived apart from spouse all year): phaseout starts at $150,000; no Roth contribution at $165,000 or more.
- Married filing separately (lived with spouse during the year): phaseout applies above $0; no Roth contribution at $10,000 or more.
5) Avoiding (and fixing) excess contributions
If you contribute more than allowed, a penalty tax can apply. One common fix is to withdraw the excess contribution (and any earnings on it) by the tax-filing deadline to reduce or avoid certain penalties—rules vary depending on timing and what you deducted.
6) A quick planning checklist
- Confirm you have enough taxable compensation to support the contribution.
- Decide traditional vs. Roth based on whether a deduction is available and whether Roth income limits apply.
- If you’re married, check spousal IRA rules to maximize household contributions.
- Set a reminder for the contribution deadline tied to the tax-filing due date.