IRA Contribution Details for 2025
The Internal Revenue Service (IRS) has announced the 2025 IRA contribution limits will remain unchanged from 2024. Here’s the breakdown:
- For individuals under the age of 50, the general IRA contribution limit is set at $7,000.
- For those 50 and older, you can contribute up to $8,000 in your IRA, leveraging the additional 'catch-up' contribution.
However, one notable change for 2025 is the increase in income ranges for determining eligibility to make deductible contributions to Traditional IRAs. Another change is the increase in income ranges for contributing to Roth IRAs (refer to the chart in the “Impact of Income on IRA Contributions” section for details).
When comparing these numbers to prior years, savers continue to have the same opportunity to maximize their retirement savings.
Types of IRAs: Roth and Traditional
The two most common types of IRAs are Roth IRAs and Traditional IRAs. Let’s break them down:
- Traditional IRA: Contributions may be tax-deductible, and any earnings grow tax-deferred until withdrawals in retirement. Taxes are paid when you withdraw funds.
- Roth IRA: Contributions are made with after-tax dollars, meaning there’s no tax deduction upfront. However, withdrawals in retirement are tax-free, as long as conditions are met.
Both IRAs offer unique tax advantages. The choice often depends on your current financial situation, tax bracket, and long-term retirement goals.
Impact of Income on IRA Contributions
Roth IRA Contributions
Your Modified Adjusted Gross Income (MAGI) determines how much you can contribute to a Roth IRA. For 2025, the Roth IRA income phase-out ranges are as follows:
|
Single Filers (MAGI) |
Married Filing Jointly (MAGI) |
Married Filing Separately (MAGI) |
Maximum Contribution for Individuals under age 50 |
Maximum Contribution for Individuals age 50 & older |
|
Under $150,000 |
Under $236,000 |
$0 |
$7,000 |
$8,000 |
|
$151,500 |
$237,000 |
$0 |
$6,300 |
$7,200 |
|
$153,000 |
$238,000 |
$0 |
$5,600 |
$6,400 |
|
$154,500 |
$239,000 |
$0 |
$4,900 |
$5,600 |
|
$156,500 |
$240,000 |
$0 |
$4,200 |
$4,800 |
|
$158,000 |
$241,000 |
$0 |
$3,500 |
$4,000 |
|
$159,500 |
$242,000 |
$0 |
$2,800 |
$3,200 |
|
$161,000 |
$243,000 |
$0 |
$2,100 |
$2,400 |
|
$162,500 |
$244,000 |
$0 |
$1,400 |
$1,600 |
|
$164,000 |
$245,000 |
$0 |
$700 |
$800 |
|
$166,000 & over |
$246,000 & over |
$10,000 & over |
$0 |
$0 |
Traditional IRA Contributions
On the other hand, Traditional IRAs function differently. While there's no direct income limit that curtails your ability to contribute, the tax deductions you can claim on those contributions can be influenced by your MAGI, especially if you or your spouse are covered by a workplace retirement plan.
To learn more about IRA contribution limits, visit the IRS website here.
Deductions and Tax Implications on IRA Contributions
The choice between a Roth IRA and a Traditional IRA comes down to when you want to pay taxes:
- Roth IRA: No upfront tax deduction, but withdrawals in retirement are tax-free.
- Traditional IRA: Contributions may be tax-deductible upfront, but withdrawals are taxed as ordinary income in retirement.
The deductibility of Traditional IRA contributions depends on whether you (or your spouse) are covered by a workplace retirement plan and your income level.
Making the Most of Retirement
The 2025 IRA contribution limits provide an opportunity for you to plan your retirement savings effectively. Whether you’re focused on tax-deferred growth with a Traditional IRA or tax-free withdrawals in retirement with a Roth IRA, understanding the contribution rules and income thresholds can help you stay informed.
Please note: We do not offer investment and tax advice. It's advisable to periodically review your contributions and ensure everything aligns with the prevailing regulations with a tax professional.
Learn more about IRAs and explore your options by opening an account today at iTrustCapital!
DISCLAIMER
This article is for information purposes only. It does not constitute investment advice in any way. It does not constitute an offer to sell or a solicitation of an offer to buy or sell any cryptocurrency or security or to participate in any investment strategy.
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