Overview
As taxpayers focus their attention on preparing their 2024 tax return, many will assess whether to contribute to an individual retirement account (IRA) for 2024. This article will review the deadline for making traditional and Roth IRA regular contributions, regular contribution eligibility, the 2024 and 2025 regular contribution limits, and traditional IRA regular contribution deductibility.
Traditional and Roth IRA regular contribution eligibility
Compensation requirement
For IRA regular contribution eligibility purposes compensation includes wages, salaries, tips, bonuses, commissions, self-employment net profit, taxable alimony and separate maintenance (see “Note” below), nontaxable combat pay, and a spouse’s compensation. It does not include passive income such as interest, dividends, earnings from property, IRA income, pension income, or social security income.
Example
Ronald, age 68 and single in 2024, had income from his pension, social security, gains from the sale of stock, and interest on some certificates of deposit. Because none of his income qualifies as compensation, Ronald cannot contribute to a traditional or Roth IRA for tax year 2024. Assuming no changes in compensation, Ronald cannot make regular contributions for future tax years either.
Note: Under the Tax Cuts and Jobs Act of 2017, alimony received through a divorce or separation instrument executed after December 31, 2018, will not be taxable to the recipient, and therefore will not be considered compensation for purposes of making an IRA regular contribution.
Roth IRA—Modified Adjusted Gross Income (MAGI) requirement
An individual whose MAGI is too high will be restricted from making a Roth IRA regular contribution. An individual’s tax filing status and MAGI will determine whether he/she is eligible to make a full contribution, a partial contribution, or no contribution to his/her Roth IRA. These MAGI limits are subject to an annual cost of living adjustment (COLA) and are as follows for 2024 and 2025: