Key Points
Contribution Limits
An IRA holder's maximum annual contribution is the lesser of: the applicable dollar limit, or 100% of the individual's earned compensation for the year.
| Age | 2026 Base Limit | Catch-Up | Total Limit |
|---|---|---|---|
| Under age 50 | $7,500 | — | $7,500 |
| Age 50 and older | $7,500 | $1,100 | $8,600 |
Kitty Hawke, a high school student, earns $1,200 from babysitting. Her maximum IRA contribution for the year is $1,200 — the amount of her compensation — even though the annual dollar ceiling is much higher.
Individuals may hold more than one IRA account. However, the annual limit applies to the total contributions to all IRAs (traditional and Roth combined) for the year. Opening additional accounts does not increase the contribution limit.
The tax code limits how much may be contributed but does not require contributions. If an individual does not contribute the maximum in a given year, the shortfall cannot be made up with excess contributions in later years.
Ed Sanders earns $30,000 this year and contributes only $3,000 to his IRA (below the annual limit). Next year he again earns $30,000. His contribution limit next year is still the standard annual ceiling — he cannot add extra to make up for the prior-year shortfall.
Acceptable Forms of Contribution
Contributions to an IRA must be made in the form of cash, which includes checks, money orders, wire transfers, and even credit card advances. An IRA contribution made by credit card advance is acceptable as long as the bank honors the charge — the taxpayer need not repay the advance before the tax return due date.
Because new IRA contributions must be in cash, contributions of property (such as stock) directly to an IRA are not allowed. However, an IRA custodian may use the cash contribution to purchase stock at the self-directed IRA owner's request. Property may also be rolled over or transferred to an IRA from an existing qualified plan or another IRA.
Timing of Contributions
An IRA owner may make contributions for a tax year at any time during that year or by the tax return filing date — generally April 15 of the following year. Unlike most other qualified plans, the IRA contribution deadline is not extended by filing extensions.
Because there is a delay between the close of the tax year and the filing date, IRA owners who contribute between January 1 and April 15 must indicate the year for which the contribution is being made. If the IRA owner does not notify the custodian, the custodian must assume the contribution is for the current tax year in which the contribution is made.
Martha Adams makes a contribution to her IRA on March 1 but does not inform the IRA custodian whether it is for the prior year or the current year. The custodian must treat it as a current-year contribution.
A taxpayer may file a return claiming an IRA deduction before actually making the contribution, but the contribution must then be made by the return's due date.
Liz Dickenson files her return on February 15 claiming a full IRA deduction, though she has not yet funded the IRA. On April 10 she sends a check designated as a prior-year contribution. Her contribution is timely because it was made before April 15. Had she missed that deadline, she would need to file an amended return to remove the deduction.
Excess Contributions
If an individual contributes more than is permitted, the excess is subject to a 6% excise tax. This tax is cumulative — it applies each year the excess remains in the account, until the situation is corrected. The excess contribution (and any earnings generated by it) should be withdrawn by the tax filing date for that year to avoid the penalty.
IRA holders who have made excess contributions may correct the situation by underfunding the account in future years. Previous under-fundings, however, cannot be used to correct a current excess.
Spousal IRAs
Spousal IRAs are available to married couples who file a joint tax return when one spouse has little or no earned income. The employed spouse may establish a separate IRA for the non-working spouse. Key rules:
- Each spouse must maintain a separate IRA account — joint IRAs are not permitted.
- The total contribution to both accounts combined may not exceed the lesser of: the couple's combined compensation, or twice the annual contribution limit.
- Contributions may be split between the two accounts in any proportion, but neither account may receive more than the individual annual limit.
Juan Enriquez earns $45,000. His wife Maria earns $2,500 from a part-time job. They are joint filers. Each may contribute up to the annual IRA limit to their own separate IRA account, limited by their combined earned income.
Contributions are permitted to a spousal IRA for the benefit of a non-working spouse, as long as the couple has sufficient combined earned income. Under SECURE Act 2.0, with no age restriction on traditional IRA contributions, both spouses may contribute at any age.
Rayston, age 72, earned $7,500 from part-time work. His wife Melissa, age 66, has no earned income. Both may contribute to their own traditional IRAs, limited to the lesser of each individual's annual limit or Rayston's total earned income.
Divorced individuals may continue to contribute to a previously established spousal IRA. They may contribute the lesser of the annual limit or their earned compensation. Alimony (under pre-2019 agreements) is considered compensation for IRA contribution purposes.
Deductibility of Contributions
Whether a traditional IRA contribution is tax-deductible depends on two factors: whether the contributor is covered by an employer-sponsored retirement plan, and their modified adjusted gross income (MAGI).
Individuals who are not covered by any employer-sponsored plan during the year may deduct the full IRA contribution regardless of income. If the individual is an active participant, the deduction is phased out as income rises.
An employee is considered an active participant if eligible to be covered (at any time during the year) by any of the following — whether or not contributions are actually made or benefits are vested:
- Qualified pension, profit-sharing, or stock bonus plan (including 401(k)s)
- Qualified annuity plan
- Tax-sheltered annuity (TSA / 403(b)) plan
- Simplified Employee Pension (SEP)
- SIMPLE plan
- Government plan (local, state, or federal)
Shannon is eligible for her employer's 401(k) plan. She is only 40% vested and made no deferral contributions this year. She is still considered an active participant for IRA deductibility purposes.
Leroy qualifies for his employer's SEP. Due to financial difficulties, no SEP contributions were made this year. Leroy is still an active participant when determining the deductibility of his IRA contribution.
If an active participant's MAGI falls within the phase-out range, the IRA deduction is reduced proportionally. Above the top of the range, no deduction is allowed — though a nondeductible contribution is still permitted.
| Filing Status / Coverage | Full Deduction Below | No Deduction Above |
|---|---|---|
| Single / Head of Household — active participant | $79,000 | $89,000 |
| Married Filing Jointly — covered spouse | $126,000 | $146,000 |
| Married Filing Jointly — non-covered spouse | $236,000 | $246,000 |
| Married Filing Separately — active participant | $0 | $10,000 |
Beginning in 1998, active participant status of one spouse is not attributed to the other. A non-participant spouse may take a full deduction for IRA contributions if their joint AGI is below the non-participant phase-out floor ($236,000 for 2026). This allows most homemakers to deduct their IRA contributions even if their working spouse is covered by a plan at work.
Norton is covered by a 401(k) at work; his wife Trixie is a full-time homemaker. With joint AGI of $125,000: Trixie can make a fully deductible IRA contribution (she is not an active participant and their joint income is below the $236,000 non-participant threshold). Norton's contribution is non-deductible because he is an active participant and his income exceeds the MFJ active-participant phase-out.
If their joint AGI were $240,000, Trixie would be entitled to only a partial deduction (the income falls within her $236,000–$246,000 phase-out range). Norton's contribution remains non-deductible.
If their joint AGI exceeded $246,000, neither could make a deductible IRA contribution — though both may still make nondeductible contributions.
Nondeductible Contributions
Individuals whose IRA deductions are reduced or eliminated due to income phase-outs may still make nondeductible contributions to a traditional IRA up to the annual limit. This option is also available to individuals who cannot contribute to a Roth IRA due to income limits.
Because only the earnings portion of a nondeductible IRA distribution is taxable (the after-tax contributions are returned tax-free), the account holder must track their cost basis using IRS Form 8606, filed with the taxpayer's Form 1040 each year nondeductible contributions are made.
Both deductible and nondeductible contributions may be made to the same IRA account. The account holder is not required to inform the custodian of the nondeductible nature of a contribution. However, recordkeeping is essential — the paperwork involved in tracking nondeductible contributions can be extensive.
In most cases, a Roth IRA offers a superior alternative to a nondeductible traditional IRA, since qualified Roth distributions are entirely tax-free rather than only partially tax-free. However, for individuals whose income exceeds the Roth eligibility thresholds, a nondeductible traditional IRA remains a valid tax-deferred savings vehicle.