Whether you have access to a workplace retirement account or not, everyone with earned income can contribute to their own IRA. However, depending on your income, work situation and the type of IRA chosen, your contributions may or may not be tax-deductible. There are several types of IRAs available and it’s important to know whether IRA contributions are tax-deductible. A financial advisor may also be able to help with some of these questions.
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Get Started NowWhat Is an IRA?
IRA stands for an individual retirement account. The money that you put in an IRA grows tax-deferred throughout your life. In exchange, you cannot access the funds until the retirement age of 59 ½, except in select circumstances. Saving for retirement in an IRA is attractive for most investors because of the following benefits:
- Easy to set up: Setting up an IRA is easy and quick. Many investment companies allow you to set up your account online or through a mobile app in minutes.
- Access to a wide variety of investments: While company retirement plans limit contributions to a handful of choices, IRAs have far more investment options. You can invest in stocks, bonds, mutual funds, ETFs and a variety of alternative assets.
- Unemployed spouses may also contribute: If your spouse has earned income, you do not need to be employed to contribute to an IRA. This benefit ensures that everyone can save towards their retirement needs.
- No taxes on annual gains: As long as the money stays in your IRA, it will continue to grow tax-deferred. Depending on the type of IRA you’ve selected, withdrawals may be tax-free or taxed as ordinary income.
Due to the valuable tax benefits of an IRA, there are limits to how much you can contribute each year. This limit is now indexed for inflation and the IRS updates the contribution limits every few years, if not annually. In 2025, you can contribute up to $7,000 to your IRA (same as in 2024). For investors ages 50 and over, you can contribute an extra $1,000 as a “catch-up” provision.
Are IRA Contributions Tax-Deductible?
There are three main types of IRAs to choose from: traditional IRA, Roth IRA and nondeductible IRA. Each one has specific benefits and features that make them ideal for different types of investors. Your choice and eligibility to contribute depend on your income, tax-filing status and the availability of a workplace retirement account.
The income limits in the charts below are indexed for inflation. It is wise to compare the limits each year versus your income and tax-filing status. The results will determine whether or not you are eligible to contribute and deduct your contributions.
Traditional IRA
A traditional IRA receives contributions on a pretax basis and withdrawals are taxable. The ability to deduct contributions is based on income, access to a company-sponsored retirement plan and tax-filing status. In other words, if you can contribute to a 401(k), 403(b) or another company plan, you may not be able to deduct your IRA contributions if you make too much money.
On the other hand, if you aren’t covered by a workplace retirement plan (like a 401(k), 403(b) or 457 plan), you can contribute up to the maximum contribution and deduct the full amount from your taxes. Finally, for spouses who file separately, the income limitations are the same, whether you or your spouse have access to a workplace retirement account.
Traditional IRA Deductions for 2025 – Single, head of household, married filing separately
| If Your Filing Status Is … | And Your Modified AGI Is … | Then You Can Take … |
|---|---|---|
| Single or head of household | $79,000 or less | Full deduction up to amount of contribution limit |
| Single or head of household | More than $79,000 but less than $89,000 | A partial deduction |
| Single or head of household | $89,000 or more | No deduction |
| Married filing separately | Less than $10,000 | A partial deduction |
| Married filing separately | $10,000 or more | No deduction |
Married Filing Jointly
If both spouses are not covered by a workplace retirement plan, both may contribute up to the maximum amount and deduct it from their taxes when filing jointly. However, if one or both spouses have access to a workplace retirement plan, their income will dictate whether or not they can deduct those contributions. Follow the chart below for guidance.
Traditional IRA Deductions for 2025 – Married filing jointly or qualifying widow(er)
| If Your Filing Status Is … | And Both Spouses Have Workplace Plans … | Or One Spouse Has Workplace Plan … | Then You Can Take … |
|---|---|---|---|
| Married filing jointly or qualifying widow(er) | $126,000 or less | $236,000 or less | Full deduction up to the amount of contribution limit |
| Married filing jointly or qualifying widow(er) | More than $126,000 but less than $146,000 | More than $236,000 but less than $246,000 | A partial deduction |
| Married filing jointly or qualifying widow(er) | $146,000 or more | $246,000 or more | No deduction |
Roth IRA
Contributions to a Roth IRA aren’t deductible (and you don’t report the contributions on your tax return), but qualified distributions or distributions that are a return of contributions aren’t subject to tax. To be a Roth IRA, the account or annuity must be designated as a Roth IRA when it’s set up.
The agency has software that you can use to determine if your distribution from a Roth IRA or designated Roth account is taxable. Before beginning, you will need to know whether or not you have a cost basis to recover. Your basis is the amount of contributions in your Roth IRAs. Also, you will need to the year the Roth IRA was first established for your benefit.
Non-deductible IRA
A non-deductible IRA is a traditional IRA that is not tax-deductible. Investments within a non-deductible IRA benefit from tax-deferred growth. At retirement age, you can withdraw your contributions without paying taxes on them.
However, the investment gains from this account are taxed as ordinary income. Because of this, investors may be better off investing in a taxable brokerage account to benefit from capital gains tax rates when they sell assets. Additionally, taxable brokerage accounts allow for a stepped-up basis on assets passed to beneficiaries upon your death.
The primary reason why an investor may contribute to a non-deductible IRA is the ability to convert the account to a Roth IRA. This process is known as a “backdoor Roth IRA” and enables the investor to contribute to a Roth IRA when their income is too high.
Can You Invest in Multiple IRAs?
Investing in multiple Individual Retirement Accounts (IRAs) is a strategy that many savvy investors consider to diversify their retirement savings. While it is entirely possible to hold more than one IRA, it’s important to understand the rules and benefits associated with this approach. Each type of IRA offers unique advantages, and having a mix can help tailor your retirement strategy to your specific financial goals and tax situation.
Holding multiple IRAs allows you to diversify not just your investments but also your tax strategy. A Traditional IRA offers tax-deferred growth, meaning you pay taxes on withdrawals during retirement. In contrast, a Roth IRA provides tax-free growth, as contributions are made with after-tax dollars. By investing in both, you can potentially manage your tax liabilities more effectively in retirement, choosing which account to draw from based on your tax situation at the time.
Bottom Line
IRAs are a valuable tool for investors to save for retirement. All contributions grow tax-free until retirement age. However, there are annual contribution limits, which may be reduced based on your income, tax-filing status and access to a workplace retirement account. There’s still time to open your IRA before you file your taxes for this year. Contact your financial advisor to open your account or to find out how much you can contribute.
Tips for Saving for Retirement
- Determining what accounts to use for your retirement nest egg can be a challenge. Working with a financial advisor can make the selection easier based on their expertise and understanding of your goals. Finding a financial advisor doesn’t have to be hard. SmartAsset’s free tool matches you with vetted financial advisors who serve your area, and you can have a free introductory call with your advisor matches to decide which one you feel is right for you. If you’re ready to find an advisor who can help you achieve your financial goals, get started now.
- Saving for retirement is one of the biggest financial goals for most investors. However, how much you will have saved by the time you retire depends on your savings rate, how your investments perform and how long you delay retirement. Our retirement calculator can help you estimate how much your savings could be worth and whether they’ll be enough to potentially cover your expenses.
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