In general, for the 2024 tax year, the contribution limits for Traditional Individual Retirement Accounts (IRAs) are as follows:
- Individuals under Age 50: The maximum contribution limit is $7,000 for 2024.
- Individuals Age 50 and Over: The maximum contribution limit is $8,500 for the 2024 tax year. An additional $1,000 contribution is referred to as a “catch-up” contribution.
These contribution limits apply to both Traditional IRAs and Roth IRAs combined, meaning the total contributions to all IRAs cannot exceed these limits for the 2024 tax year.
However, taxpayers should know the additional income limitations and retirement account rules that apply to Traditional IRAs before making those contributions.
When Must the Contributions Be Made?
The individual must make their 2024 contributions between January 1, 2024, and December 31, 2024. However, individuals can also contribute to their 2024 IRA on or before the filing deadline for their income tax return.
Suppose a taxpayer forgot to contribute in the 2024 calendar year. In that case, they can still contribute in 2025 and apply it retroactively to 2024. For example, if an individual plans to electronically file their Form 1040 (US Individual Income Tax Return) on April 15, 2024, they can make the IRA contribution before April 15, 2025, and apply it to 2024.
When the taxpayer contributes cash to the IRA custodian in 2025, the taxpayer should let the custodian know that the contribution will be applied to the 2024 tax year, which ensures the custodian accurately prepares Form 5498 (IRA Contribution Information).
What are the Earned Income Limits for Traditional IRA
Unlike a Roth IRA, a Traditional IRA has no income limitations. Whether an individual has $30,000 of earned income or $1,000,000 of earned income, they can still make the contribution. A separate issue is whether they can deduct the contributions.
However, the individual must have “earned” income to contribute. Earned income includes taxable compensation such as wages, salaries, commissions, or self-employment income.
For example, John Taxpayer is a single-filing taxpayer and unemployed, so he receives no compensation in 2024. John receives investment income (interest, dividends, and capital gains) of $45,000 for the 2024 tax year.
Even though John has taxable income, he cannot contribute to a Traditional IRA because he has no earned income and only investment income.
What are the Deduction Limits for Traditional IRA
Taxpayers can generally deduct the amount of their contributions against their taxable income for the year. The amount of the deduction will generally depend upon two factors:
- Is the individual and/or spouse covered by a retirement plan at work?
- What is the taxpayer’s modified adjusted gross income (MAGI) for the year?
The IRS provides a helpful table where taxpayers can determine how much, if any, of their Traditional IRA contributions are deductible against taxable income.
IRS Table for Traditional IRA Deduction Limits
If the taxpayer has any nondeductible Traditional IRA contributions, the taxpayer can track those amounts using Form 8606 (Nondeductible IRA).