If you’re looking into retirement accounts, chances are you’ve come across traditional individual retirement accounts (IRAs). They are super popular among both salaried and self-employed individuals.
That said, there is a lot of confusion around traditional IRAs. What’s the current contribution limit? Who is eligible? What are the income and tax deductibility limits? Numerous other questions might swirl through your mind.
This guide will provide some clarity. Let’s unpack income limits for a traditional IRA and related concepts so you can make an informed decision:
What Exactly is a Traditional IRA?
A traditional individual retirement account (IRA) is one of the best ways to save for retirement while ensuring tax benefits. It helps you invest for the future, making retirement and other life events stress-free.
Traditional IRAs are pretty straightforward: All eligible contributions are tax-deductible in the year they’re made. This will potentially lower your taxable income. Moreover, investments within the account grow tax-deferred. You pay income tax upon withdrawals (when you take money out of the retirement account).
Pro tip? Opening a traditional IRA is an excellent choice if you expect to be in the same tax bracket or a lower one in retirement than you are currently. In this way, you will pay taxes on withdrawals at a reduced rate, rather than a higher rate now.
Income Limit for a Traditional IRA
Let’s clear one thing: There is no income limit for a traditional IRA. Your contributions are not impacted by the amount of money you make annually.
That said, your ability to deduct contributions is affected by your income. Moreover, if you and/or your spouse are covered by a retirement plan at work and are filing jointly, the deduction starts to decrease at a MAGI (modified adjusted gross income) of $126,000 and is eliminated at $146,000.
But if you or your spouse doesn’t have an employer-sponsored retirement plan, you can deduct your IRA contributions no matter your income.
Eligibility Criteria for Contributions
Before we discuss contribution limits, let’s rewind the eligibility criteria. Remember the following things:
- All contributions must be made with your earned income. This includes wages, salaries, and tips. Freelance work and self-employment are also eligible income sources.
- There is no age limit for contributing to a traditional IRA.
Contribution Limits for Traditional IRAs 2025
Every year, the IRA revises its contribution limits. For 2025, the contribution limit is $7,000 for those under the age of 50. However, people aged 50 or older can contribute an additional $1,000, bringing the total to $8,000. These numbers apply even if you’re already contributing to an employer-sponsored plan, such as a 401(k).
You can also roll over money from another retirement account. But this money won’t count towards the annual contribution limit.
Some traditional IRA providers, such as SoFi, offer “catch-up” contributions each year. You can also seek guidance from experts and make the most of your retirement income.
