Having an IRA is a smart financial move. You can save for retirement and defer your tax responsibilities when you contribute to one. You only have to pay taxes when you withdraw the money, although you’ll have to pay an additional 10% penalty tax if you withdraw before the age of 59½.

However, the IRS limits how much you can contribute to a traditional or Roth IRA each year. For 2024, that limit is $7,000. For 2025, the IRS increased the limit to $7,500. Americans age 50 or older may contribute an additional $1,000 above the standard limit in both years.

There are also several exceptions to the early withdrawal penalty, including distributions to qualified reservists, certain medical or education expenses, first-time home purchases, disability, birth or adoption expenses, and others. Additionally, rollover contributions from another retirement plan do not count toward the annual $7,000 (or $7,500) limit.

Traditional IRAs, Roth IRAs, and Your Income

Just as a refresher, a traditional IRA allows you to defer paying taxes on your contributions and reserves the tax bill for when you withdraw. It accomplishes this deferment by permitting you to list your contributions (up to the annual limit) as deductible expenses on your tax return.

A Roth IRA, by contrast, does not permit you to take this deduction. However, you don’t have to pay taxes on a Roth IRA withdrawal in the future (aside from the early withdrawal penalty, if applicable).

In either case, the IRA places limits on these benefits according to the modified adjusted gross income, or MAGI, that you report on your taxes. In the case of traditional IRAs, you may not be able to deduct the full amount or any amount at all on your return. In the case of Roth IRAs, you may be restricted from making contributions to the account altogether.

So, let’s walk through how your MAGI can potentially affect what you can do with your IRA.

Tax Deduction Limits for Traditional IRAs (2024)

Traditional IRAs allow you to deduct your contributions from your annual tax return. However, depending on your employment situation, you may be limited as to the amount you can deduct.

In each case, there is a range of MAGI that applies. At the lower end, you may deduct the entire contribution. At the upper end, you may not take any deduction. Inside the range, you may take a partial deduction. Below are the different income levels and filing statuses that apply for 2024.

2024 – If covered by an employer retirement plan

Single or head of household

• Full deduction: $79,000 or lower
• Partial deduction: $79,001–$88,999
• No deduction: $89,000 or higher

Married, filing jointly or qualified widow(er)

• Full deduction: $123,000 or lower
• Partial deduction: $123,001–$142,999
• No deduction: $143,000 or higher

Married, filing separately

• Partial deduction: Less than $10,000
• No deduction: $10,000 or more

2024 – If not covered by an employer retirement plan

Single, head of household, or qualifying widow(er)

• Full deduction: No income limit

Married, filing jointly or separately IF spouse is not covered by an employer retirement plan

• Full deduction: No income limit

Married, filing jointly IF spouse is covered by an employer retirement plan

• Full deduction: $230,000 or lower
• Partial deduction: $230,001–$239,999
• No deduction: $240,000 or higher

Married, filing separately IF spouse is covered by an employer retirement plan

• Partial deduction: Less than $10,000
• No deduction: $10,000 or more

Determining the Amount of a Partial Deduction

If you fall within one of the ranges above, you need to know how to calculate the amount of deduction you can take for your traditional IRA. Though the formula is simple, it’s easier to understand through a step-by-step example.

Let’s say you are filing jointly as a married person, and your MAGI is $130,000:

1. Subtract $123,000 (the lower bound of the range) from $130,000 (your MAGI) to get $7,000.
2. Divide $7,000 by $20,000 (the size of the range) to arrive at 0.35.
3. Multiply 0.35 by $7,000 (the maximum deduction) to get $2,450.
4. Subtract $2,450 from $7,000, resulting in $4,550.

Thus, you may deduct up to $4,550 of your traditional IRA contributions.

Roth IRA Reduced Contribution Limits (2024)

Because the Roth IRA does not permit any deductions, the MAGI-determined limits apply to the amount that you may contribute to the fund itself.

Married, filing jointly or qualifying widow(er)

• Full contribution permitted: $229,999 or lower
• Partial contribution permitted: $230,000–$239,999
• No contribution permitted: $240,000 or higher

Single, head of household, or married filing separately AND spouse did not live with you during the past year

• Full contribution permitted: $145,999 or lower
• Partial contribution permitted: $146,000–$160,999
• No contribution permitted: $161,000 or higher

Married, filing separately, and spouse lived with you during the past year

• Partial contribution permitted: Less than $10,000
• No contribution permitted: $10,000 or more

Determining the Amount of a Partial Contribution

To determine the amount of your partial contribution limit, follow a similar set of steps as you would for the traditional IRA partial deduction:

1. Subtract the lower end of your range from your MAGI.
2. Divide the difference by the dollar amount of the range ($10,000 or $15,000, depending on filing status).
3. Multiply the result by $7,000 (2024 maximum contribution) or $7,500 (2025 maximum).
4. Subtract the result of step 3 from the maximum contribution limit to determine your allowable partial contribution.

Please note that if you are age 50 or older, add $1,000 to the maximum limit. Thus, your partial contribution will be calculated using $8,000 (2024) or $8,500 (2025), rather than $7,000 or $7,500.

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Disclaimer: None of the information above should be construed as financial or tax advice. For more specific questions about your IRA, contact a financial professional or certified public accountant.