6.3 IRA Contributions (Traditional)
Key Takeaways
- For 2025, the traditional IRA contribution limit is $7,000 (under 50) or $8,000 (50+); contributions must be made by April 15, 2026 with no extensions.
- Contributions require earned income (compensation); they cannot exceed taxable compensation for the year.
- Deductibility depends on whether the taxpayer or spouse is an "active participant" in an employer retirement plan (W-2 Box 13).
- 2025 deduction phase-outs (active participant): Single/HOH $79,000-$89,000; MFJ filer covered $126,000-$146,000; MFJ spouse only covered $236,000-$246,000; MFS $0-$10,000.
- Excess contributions are subject to a 6% excise tax each year they remain in the IRA (reported on Form 5329).
2025 Contribution Limits
| Age | Limit |
|---|---|
| Under 50 | $7,000 |
| Age 50+ | $8,000 ($7,000 + $1,000 catch-up) |
Contribution limits are unchanged from 2024.
Contribution Deadline
Contributions must be made by April 15, 2026 for tax year 2025. Filing extensions do NOT extend the IRA contribution deadline.
Earned Income Requirement
Qualifies as compensation:
- Wages, salaries, tips
- Self-employment income
- Taxable alimony (pre-2019 divorces)
Does NOT qualify:
- Interest and dividends
- Rental income
- Social Security benefits
Deductibility Rules
Not Covered by Employer Plan
If neither spouse is covered by an employer retirement plan: Fully deductible at any income level.
You ARE Covered by Employer Plan (2025)
| Filing Status | Full Deduction | Phase-Out | No Deduction |
|---|---|---|---|
| Single/HOH | < $79,000 | $79,000-$89,000 | > $89,000 |
| MFJ | < $126,000 | $126,000-$146,000 | > $146,000 |
| MFS | N/A | $0-$10,000 | > $10,000 |
You NOT Covered, But Spouse IS Covered (2025)
| Filing Status | Phase-Out Range |
|---|---|
| MFJ | $236,000-$246,000 |
Spousal IRA
A non-working spouse can contribute based on the working spouse's compensation if the couple files jointly.
Excess Contributions
A 6% excise tax applies per year on excess contributions until corrected. Report on Form 5329.
EA Exam Tips
- Deadline is April 15 of the following year with NO extensions
- Memorize 2025 phase-outs: $79K/$89K, $126K/$146K, $236K/$246K
- Check W-2 Box 13 for active participant status
- Form 8606 is used for non-deductible contributions
Michael (age 52) is NOT covered by an employer plan, but his spouse IS. Their 2025 joint MAGI is $241,000. How much of his $8,000 contribution can he deduct?
Sandra, age 35, has $6,000 of self-employment income and $50,000 of rental income in 2025. What is her maximum traditional IRA contribution?
Lisa files an extension to October 15, 2026. By when must she make her 2025 traditional IRA contribution?
For 2025, what is the upper phase-out limit for a single active-participant traditional IRA deduction?