You must distinguish permission to contribute from permission to deduct. An individual retirement account (IRA) holds retirement investments under special tax rules.
Under Internal Revenue Code §219, traditional and Roth IRAs share a 2026 regular contribution limit of $7,500. Individuals age 50 or older receive an additional $1,100: $7,500 + $1,100 = $8,600. Contributions cannot exceed eligible compensation, generally earnings from work. There is no maximum contribution age.
Spouses filing jointly may use combined eligible compensation to fund separate IRAs, including one for a nonworking spouse. Each spouse keeps an individual limit; combined contributions cannot exceed combined compensation. Under §219(f)(3), regular contributions are due by the tax-return filing deadline, excluding extensions.
Traditional IRA contributions may be deductible, reducing current taxable income. Workplace-plan coverage affects deductibility, not eligibility to contribute. A covered worker already has a tax-favored workplace plan, so the IRA deduction for a covered household shrinks as income rises.
For 2026, traditional IRA deduction phase-outs are:
- Covered single or head-of-household contributor: $81,000 to $91,000 MAGI.
- Covered contributor filing jointly: $129,000 to $149,000.
Common mistakes
- Treating a covered single client's $95,000 MAGI as prohibiting traditional IRA contributions. It eliminates the deduction, not contribution eligibility.
- Giving every employer a fresh $24,500 employee deferral limit. Combine applicable deferrals across employers.
- Adding $8,000 and $11,250 catch-ups at age 62. The larger amount replaces the smaller one.
Bottom line
- Traditional and Roth IRAs share a $7,500 regular limit plus $1,100 at age 50 or older, subject to compensation.
- Workplace coverage affects traditional IRA deductibility; Roth IRA direct contributions have income limits.
- Roth conversions include previously untaxed amounts in income and use proportionate basis recovery.
- The basic 401(k)/403(b) deferral limit is $24,500; 457(b) has a separate $24,500 limit.
Exam shortcut
Identify the account, contributor and transaction before choosing a limit. For withdrawals, separate ordinary income tax from additional tax. Then inspect basis, age, exceptions and any five-year clock. For transfers, follow who receives the check. Participant payment signals a deadline and possible withholding. For inherited accounts, mark beneficiary category and the owner's required beginning date before applying the deadline.
The full lesson (about 3,945 words, 26 min read) adds 2 worked examples, all 6 common mistakes, a self-check, free in the app.
Learning objectives
- C14
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