Individual Retirement Accounts (IRAs) are a popular way to save for retirement while getting potential tax benefits. The two most common types are Traditional IRAs and Roth IRAs, and each has different tax rules for contributions and withdrawals.
How do IRA contributions work?
With a Traditional IRA, the money you contribute may be fully or partially tax-deductible, which can lower your taxable income.
If you or your spouse has a retirement plan at work, a phase-out range applies. This means the deduction gradually decreases as your income increases and may be eliminated once you reach IRS income limits.
Roth IRA contributions aren’t tax-deductible, but they offer flexibility. You can contribute anytime from January 1 of the tax year through the filing deadline the following year.
For example, you can make 2025 Roth IRA contributions from January 1, 2025, through April 15, 2026.
What are the IRA contribution limits for 2025?
For Tax Year 2025, the contribution limits are:
Under age 50: $7,000
Age 50 or older: $8,000
You can only contribute up to the amount of earned income you have for the year. For example, if you earned $5,000, your maximum IRA contribution would be $5,000—even though the IRS limit is higher.
What are the benefits of each type of IRA?
Traditional IRA
Contributions may be made with pre-tax dollars.
Contributions may be deductible in the year they’re made.
Taxes are deferred until you withdraw the money.
Withdrawals after age 59½ aren’t subject to early withdrawal penalties (but are taxable).
Required minimum distributions (RMDs) generally begin at age 73.
Roth IRA
Roth IRA
Contributions are made with after-tax dollars, so there’s no upfront tax deduction
Income limits apply, and higher earners may have their contribution amount reduced or eliminated
There’s no required age to start taking distributions
Qualified withdrawals can be completely tax-free
Withdrawals are generally tax-free if:
You’ve had the Roth IRA for at least five years, and
One of the following applies:
You’re 59½ or older
You’re disabled
The withdrawal is made by your beneficiaries after your death
Are IRA management fees deductible?
No. IRA management fees aren’t deductible on your federal tax return.
How are IRA distributions taxed?
When you take money out of an IRA, some or all of the distribution may be taxable unless it’s a qualified Roth IRA withdrawal.
You’ll receive Form 1099-R for any IRA distributions. This form shows how much you withdrew and how much is taxable.
Key takeaway
IRA rules depend on account type, age, income, and timing. Contribution limits are set annually, and distribution rules differ between Traditional and Roth IRAs.
This content is provided for informational purposes only and should not be construed as tax, legal, financial, accounting, or other advice. Rules and regulations vary by location and are subject to change, so please consult with an expert if you need advice specific to you.
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