Every year brings a fresh opportunity to build your retirement savings, but those windows eventually close. Once the deadline for a specific tax year passes, your chance to fund an Individual Retirement Account (IRA) for that year disappears forever.
For the 2025 tax year, you have until April 15, 2026, to make your contribution. Even if you file for a tax extension, the April 15 deadline remains firm. Making a contribution can provide immediate tax savings, or set you up for tax-free compounding down the road.
At SD Mayer & Associates, we want to help you make smart financial decisions that set you up for long-term success. Understanding your IRA options might seem complicated, but we are here to break it down. Read on to discover exactly how much you can contribute for 2025, how your income affects your options, and why contributing makes sense even if you cannot claim a direct tax deduction.
How much can you contribute for 2025?
For 2025, the standard IRA contribution limit is $7,000. If you are age 50 or older, you are allowed an additional $1,000 catch-up contribution, bringing your total to $8,000.
Keep in mind that your contributions generally cannot exceed your earned income for the year. However, if you are married, spousal IRAs allow a working spouse to fund an IRA in a nonworking spouse’s name, based on the working spouse’s income.
This $7,000 limit applies to traditional and Roth IRAs combined. You have the flexibility to put the entire amount into a traditional IRA, fund a Roth IRA completely, or split the funds between the two accounts as long as the total does not exceed your annual limit.
Are your traditional IRA contributions deductible?
Funding a traditional IRA can lower your current tax bill, and your earnings will grow tax-deferred. You will eventually pay taxes on the withdrawals, and taking money out before age 59½ typically incurs a 10% penalty.
You can make a fully deductible traditional IRA contribution if neither you nor your spouse actively participates in an employer-sponsored retirement plan. If you or your spouse do have an employer plan, your ability to deduct the contribution might be phased out based on your modified adjusted gross income (MAGI).
For 2025, the deduction phases out across these MAGI ranges:
- Single or head of household: $79,000 to $89,000
- Married filing jointly (and you are covered by an employer plan): $126,000 to $146,000
- Joint filer (you are not in an employer plan, but your spouse is): $236,000 to $246,000
- Married filing separately (and you lived with your spouse during 2025): $0 to $10,000
If your income falls inside these ranges, you can deduct a partial amount of your contribution. If your income exceeds the top of the range, you cannot deduct any traditional IRA contribution.
What about Roth IRA contributions?
Roth IRA contributions do not provide an immediate tax deduction. Instead, they offer a massive benefit later in life: tax-free withdrawals. As long as your account has been open for at least five years and you are 59½ or older, the growth in your account is never taxed.
The IRS places strict income limits on who can contribute directly to a Roth IRA. For 2025, your eligibility phases out over the following MAGI ranges:
- Single or head of household: $150,000 to $165,000
- Married filing jointly: $236,000 to $246,000
- Married filing separately (and you lived with your spouse during 2025): $0 to $10,000
Similar to traditional IRAs, falling within the range allows a partial contribution. Exceeding the top number completely restricts direct Roth contributions.
The power of a nondeductible traditional IRA
High earners often find themselves locked out of deductible traditional IRAs and direct Roth contributions. A nondeductible traditional IRA serves as an excellent alternative. While it will not reduce your 2025 tax burden, your money still benefits from tax-deferred growth. When you retire, you will only pay taxes on the earnings, because the principal was funded with after-tax dollars.
A nondeductible contribution also opens the door to a strategy known as the "backdoor" Roth IRA. You simply fund a traditional IRA with nondeductible dollars and immediately convert that account to a Roth IRA once the funds clear. Because the money was already taxed, you will only owe taxes on any minor growth that occurred between the initial deposit and the conversion.
Secure your financial future today
Taking advantage of a 2025 IRA contribution is a calculated move that pays dividends for your financial future. Remember to officially designate your deposit for the 2025 tax year when working with your brokerage, and ensure the funds are deposited before April 15, 2026.
If you need help navigating your retirement savings options or optimizing your tax strategy, contact the team at SD Mayer. We are ready to provide clear, actionable guidance to help you build lasting financial freedom. Contact us today.
SECURITIES AND ADVISORY DISCLOSURE:
Securities offered through Valmark Securities, Inc. Member FINRA, SIPC. Fee based planning offered through SDM Advisors, LLC. Third party money management offered through Valmark Advisers, Inc a SEC registered investment advisor. 130 Springside Drive, Suite 300, Akron, Ohio 44333-2431. 1-800-765-5201. SDM Advisors, LLC is a separate entity from Valmark Securities Inc. and Valmark Advisers, Inc. Form CRS Link
DISCLAIMER:
This material has been prepared for informational purposes only, and is not intended to provide, and should not be relied on for, accounting, legal or tax advice. The services of an appropriate professional should be sought regarding your individual situation.
HYPOTHETICAL DISCLOSURE:
The examples given are hypothetical and for illustrative purposes only.
