2 Big Changes to IRA Contribution and Deduction Limits for 2025

The Internal Revenue Service (IRS) recently updated its rules concerning individual retirement accounts (IRAs) for 2025. The annual contribution limits will remain the same this year, as detailed below:

• Taxpayers under age 50 can contribute $7,000 to an IRA in 2025.
• Taxpayers aged 50 and older can contribute $8,000 to an IRA in 2025.

However, investors should be aware of two important changes in 2025. First, the income limits for traditional IRA deduction limits have increased. Second, the income limits for Roth IRA eligibility and contribution limits have increased. Here are the important details.

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1. The income limits for traditional IRA deductions in 2025

Contributions made to traditional IRAs can be deducted from taxable income in certain situations, depending on tax filing status and modified adjusted gross income (MAGI). Single individuals and married couples filing jointly can deduct the full $7,000 (or $8,000 if the contributor is 50 or older) from their taxable income if they're not covered by a workplace retirement plan. Anyone covered by a workplace plan may still be able to take a full or partial deduction, as shown in the chart.

The chart details how the MAGI limits concerning the deductible portion of traditional IRA contributions changed between 2024 and 2025.

Data source: Internal Revenue Service. Chart by author.

Married individuals who file separately can't deduct any contributions made to a traditional IRA if their MAGI exceeds $10,000. Additionally, anyone eligible for a partial deduction will need to do some math to determine the precise amount.

Here's an example: Sarah is 45 years old, married, files a joint tax return, and is covered by a workplace retirement plan. She and her spouse have a combined MAGI of $140,000. Sarah can deduct up to $2,100 from her taxable income. The math is shown below:

1. The couple's MAGI ($140,000) – the lower limit ($126,000) = $14,000
2. That amount ($14,000) ÷ the size of the phaseout range ($20,000) = 0.7
3. That number (0.7) x the maximum contribution ($7,000) = $4,900
4. That contribution limit ($7,000) – that amount ($4,900) = $2,100

Here's the bottom line: In 2025, the income limits that determine what percentage (if any) of traditional IRA contributions can be deducted from taxable income increased by $2,000 for single individuals. Likewise, the income limits increased by $3,000 for married couples that file jointly when the contributor is covered by a workplace plan, and $6,000 when the contributor's spouse is covered by a workplace plan.

That means investors in those filing categories can make a little more money this year without forfeiting the ability to deduct traditional IRA contributions and reap the benefits of reducing their taxable income.

2. The income limits for Roth IRA contributions in 2025

Roth IRAs are similar to traditional IRAs in several ways. For instance, contributions can only be made by individuals with taxable income. And anyone who removes money from the account early (i.e., before age 59 and 6 months) will generally incur a 10% penalty.

There are also important differences. For instance, contributions to a Roth IRA cannot be deducted from taxable income, but qualified distributions from a Roth IRA are generally not subject to taxation by federal or state governments. Also, Roth IRAs aren't subject to required minimum distributions (RMDs), but traditional IRA account holders must take RMDs

Whether an individual can contribute to a Roth IRA is determined by their MAGI and tax-filing status. The chart below shows how the MAGI limits for Roth IRA contributions changed between 2024 and 2025.

Data source: Internal Revenue Service. Chart by author.

Married individuals who file separately can't contribute to a Roth IRA if their MAGI exceeds $10,000. Additionally, anyone eligible for a partial contribution will need to do some math to determine the precise limit.

Here's an example: Mark is 45 years old, married, and files a joint tax return. He and his spouse have a combined MAGI of $242,000. So Mark can contribute $2,800 to a Roth IRA. That math is shown below:

1. The couple's MAGI ($242,000) – the lower limit ($236,000) = $6,000
2. That amount ($6,000) ÷ the size of the phaseout range ($10,000) = 0.6
3. That number (0.6) x the maximum contribution ($7,000) = 4,200
4. The maximum contribution ($7,000) – that amount ($4,200) = $2,800

Mark hasn't reached his annual contribution limit of $7,000, so he could add the remainder to a traditional IRA. However, he wouldn't be able to deduct the contribution because he and his spouse have a combined MAGI that exceeds the limit discussed in the previous section.

Here's the bottom line: In 2025, the income limits that determine Roth IRA eligibility increased by $4,000 for single individuals and $6,000 for married couples that file jointly. Put differently, investors in those filing categories can make a little more money this year while retaining the ability to make Roth IRA contributions and reap the benefits of tax-free portfolio growth.