The IRS announced the 2025 limits for IRAs on November 1, which includes new adjusted gross income (AGI) and modified AGI (MAGI) for IRA contributions. In this article, we provide the AGI limits for 2024 and 2025 and include reminders of how they impact eligibility.
No increase for regular IRA contributions
The IRA contribution limit remains at $7,000, and the catch-up contribution for individuals aged 50 and older as of the end of the year remains at $1,000.
Reminders:
-
An individual’s regular IRA contribution cannot exceed their eligible compensation. For example, if one’s eligible compensation for 2025 is $4,000, the maximum amount one can contribute to one’s IRA for 2025 is $4,000.
Eligible compensation includes self-employment income, wages, salaries, and tips.
Rental income, dividends, interest, and profits from property investments are examples of income that are not eligible compensation. IRA owners should consult with their tax advisor to determine if they have eligible compensation for the year.
- This IRA contribution limit applies on a per-person basis. Regardless of how many IRAs an individual owns, the limit is still capped at the amount above.
- If one’s spouse has little or no income and files a joint tax return, one’s compensation can be used to meet one’s spouse’s compensation requirement for their IRA contribution.
- When determining if one reaches one’s maximum contribution amount for the year, one must add regular traditional IRA contribution, regular Roth IRA contribution, and any rollovers from 529 plans to one’s Roth IRA for the year.
Caution: Exceeding the regular IRA contribution limit could result in owing the IRS an excise tax on the excess amount.
New Modified AGI limits for deducting Traditional IRA contributions
If an individual is not covered under an employer plan and is not married to someone who is, they can claim a deduction for the full amount of their traditional IRA contribution. However, if an individual or their spouse (if married) are covered under an employer plan, their eligibility to deduct a traditional IRA contribution depends on their modified AGI.
Individuals covered under an employer plan for a year are considered “active participants” for the year.
Here are the modified AGI limits for 2024 and 2025 for each tax filing status:
| Table 1: Modified AGI Limits for 2024 and 2025 for Each Tax Filing Status |
| Tax Filing Status for IRA Contributor |
2024 Modified AGI |
2025 Modified MAGI |
Allowed Deduction |
| (a) Single individuals and heads of household who are active participants under employer plans. |
$77,000 or less |
$79,000 or less |
100% |
| $77,000 to $87,000 |
$79,000 to $89,000 |
Partial |
| $87,000 or more |
$89,000 or more |
None |
| (b) Married couples filing jointly if the spouse who makes the IRA contribution is an active participant under an employer plan. |
$123,000 or less |
$126,000 or less |
100% |
| $123,000 to $143,000 |
$126,000 to $146,000 |
Partial |
| $143,000 or more |
$146,000 or more |
None |
| (c) An individual who is not an active participant under an employer plan but is married to someone who is. |
$230,000 or less |
$236,000 or less |
100% |
| $230,000 to $240,000 |
$236,000 to $246,000 |
Partial |
| $240,000 or more |
$246,000 or more |
None |
| (d) A married individual filing a separate return who is an active participant under an employer plan |
Less than $10,000 |
Less than $10,000 |
Partial |
| $10,000 or more |
$10,000 or more |
None |
If an individual is covered under an employer plan for the year, their employer is required to check the “Retirement Plan” box in Section 13 of Form W-2. individuals who are uncertain about their active participant status should consult their tax advisor.
If an individual is covered under an employer plan and their modified AGI falls within the partial range, they are not eligible to deduct the full amount they contribute to their traditional IRA. In such cases, they can split their contribution between deductible and nondeductible or elect to treat the entire amount as nondeductible.
The following example demonstrates the formula for determining how much one can deduct if covered under an employer plan for 2025.
Example: 42-year-old Tom’s tax filing status is married filing jointly, and he is covered by an employer plan at work. The joint modified AGI for him and his spouse for 2025 is $132,000.
The maximum amount he can deduct for a traditional IRA contribution is $4,900, calculated as follows:
- $132,000 (his joint modified AGI) − $126,000 (lower end of his modified AGI range) = $6,000.
- Divide the results by $20,000 (the difference between the lower and higher end of his phaseout range: $146,000 − $126,000): $6,000 ÷ $20,000 = 0.3.
- Divide the results by the lesser of his eligible compensation or $7,000: 0.3 x $7,000 = $2,100.
- Subtract the results from $7,000: $7,000 − $2,100 = $4,900.
Tom is eligible to deduct $4,900 of his $7,000 traditional IRA contribution.
File Form 8606 for nondeductible contributions: If an individual’s contribution to their traditional IRA is nondeductible or treated as nondeductible, their tax preparer must report it on IRS Form 8606. Failure to file Form 8606 could result in owing income tax on distribution amounts that should be tax-free.
New Modified AGI limits for making Roth IRA contributions
Participating in an employer plan does not affect Roth IRA contributions. However, if an individual’s modified AGI exceeds the amount that is tied to their tax filing status, they are not eligible to make a regular contribution to a Roth IRA.
Here are the modified AGI limits for 2024 and 2025:
| Table 2: Modified AGI Limits for 2024 and 2025 |
| Tax Filing Status |
2024 MAGI |
2025 MAGI |
Allowed contribution |
| (a) All taxpayers other than b. or c. below |
$146,000 or less |
$150,000 or less |
100% |
| $146,000 to $161,000 |
$150,000 to $165,000 |
Partial |
| $161,000 or more |
$165,000 or more |
None |
| (b) Married taxpayers filing a joint return or taxpayers filing as a qualifying widow(er) |
$230,000 or less |
$236,000 or less |
100% |
| $230,000 to $240,000 |
$236,000 to $246,000 |
Partial |
| $240,000 or more |
$246,000 or more |
None |
| (c) Married individual filing a separate return |
Less than $10,000 |
Less than $10,000 |
Partial |
| $10,000 or more |
$10,000 or more |
None |
If an individual’s modified AGI exceeds the limit above, any regular contribution made to their Roth IRA will result in an excess contribution.
Splitting IRA contributions between a Traditional and Roth IRA
If an individual’s modified AGI falls within the “partial” range for a Roth IRA contribution, they may choose to split their contribution between a traditional IRA and a Roth IRA by contributing the eligible amount to a Roth IRA and the balance to a traditional IRA.
Example: 35-year-old Jane’s tax filing status is single, and her modified AGI for 2025 is $155,000. Her maximum Roth IRA contribution for 2025 is $4,670, calculated as follows:
- $155,000 (her modified AGI) − $150,000 (lower end of her phaseout range) = $5,000.
- Divide the results by $15,000 (the difference between the lower and higher end of her range): $5,000 ÷ $15,000 = 0.333 (stop at three decimal points).
- Divide the results by the lesser of Jane’s eligible compensation or $7,000: 0.333 x $7,000 = $2,330.
- Subtract the results from $7,000: $7,000 − $2,330 = $4,670.
Jane is eligible to contribute $4,670 to her Roth IRA for 2025. If she wants to, she may contribute the difference of $2,330 to her traditional IRA.
If a tax preparer uses tax-preparation software, it should calculate the amount that an individual is eligible to contribute to a Roth and the amount they are eligible to deduct for a traditional IRA contribution.
New AGI limits for the Saver’s Credit
Eligible individuals may receive a Saver’s Credit for contributions they make to their IRAs or employer plan accounts. This credit is available to individuals who are age 18 or over before the end of the year, not a full-time student, and not claimed as a dependent on another taxpayer’s return.
The rate for the Saver’s Credit is based on tax filing status and ranges from 10% to 50%, not to exceed $2,000.
The AGI limits for the Saver’s Credit for 2024 and 2025 are as follows:
| Table 3: AGI Limits for Eligibility for Saver’s Credit: Salary Deferral and IRA/Roth IRA Contributions |
| Credit Rate |
Married and Files a Joint Return |
Files as Head of Household |
Other Category of Filers |
| |
Over |
Not Over |
Over |
Not Over |
Over |
Not Over |
| 2024 |
| 50% |
$0.00 |
$46,000 |
$0.00 |
$34,500 |
$0.00 |
$23,000 |
| 20% |
$46,000 |
$50,000 |
$34,500 |
$37,500 |
$23,000 |
$25,000 |
| 10% |
$50,000 |
$76,500 |
$37,500 |
$57,375 |
$25,000 |
$38,250 |
| 0% |
$76,500 |
— |
$57,375 |
— |
$38,250 |
— |
| 2025 |
| 50% |
$0.00 |
$47,500 |
$0.00 |
$35,625 |
$0.00 |
$23,750 |
| 20% |
$47,500 |
$51,000 |
$35,625 |
$38,250 |
$23,750 |
$25,500 |
| 10% |
$51,000 |
$79,000 |
$38,250 |
$59,250 |
$25,500 |
$39,500 |
| 0% |
$79,000 |
— |
$59,250 |
— |
$39,500 |
— |
Distributions made from an individual’s IRA or employer plan account during recent years could affect eligibility for the Saver’s Credit. Please see IRS Form 8880, Credit for Qualified Retirement Savings Contributions, for an explanation of the requirements, including any transaction that could affect eligibility.
Start planning for 2025 IRA contributions now
As the saying goes, “Preparation is the key to success.” Clients should start planning for their regular IRA contribution now to maximize the benefits. The following are some planning tips to add to an IRA checklist:
- Individuals should make IRA contributions only if eligible to do so. Remember, eligibility for a Roth IRA contribution in 2024 does not guarantee eligibility for 2025—individuals should check to determine if they are within the modified AGI limits to contribute.
- Spreading IRA contributions throughout the year can be more manageable than a lump-sum contribution. Some taxpayers find it easier to come up with $580 per month rather than $7,000 as a lump sum.
- Contributions made from Jan. 1 to April 15 should be clearly designated for the previous or current year when remitting the amount to the IRA custodian.
Those who are unsure about whether they should contribute to a traditional IRA or a Roth IRA should consult with their tax advisor for assistance with choosing the one that is more suitable or if they could benefit from both by splitting their IRA contribution between the two.