Who Can Contribute to an IRA

Who Can Contribute to an IRA

Most working Americans can contribute to an IRA, but the IRS sets clear rules around earned income, age, and income limits that determine both eligibility and how much you can put in each year. Understanding these rules helps you avoid penalties and choose the right account type.

Earned Income Requirement

You must have taxable compensation to make an IRA contribution. Compensation includes wages, salaries, tips, self-employment income, and taxable alimony. Investment income, rental income, and pensions do not count. If you are married and file jointly, only one spouse needs earned income to fund both accounts, as long as the combined contributions do not exceed the working spouse's compensation.

Traditional IRA Eligibility

Anyone with earned income can open a traditional IRA, and there is no upper age limit for contributions. However, tax deductibility depends on your income and whether you or your spouse are covered by a workplace retirement plan. If you are covered by a plan, deductibility phases out at higher modified adjusted gross income levels. Even if you cannot deduct the contribution, you can still make a non-deductible contribution and the earnings grow tax-deferred.

Roth IRA Eligibility

Roth IRA contributions are subject to income limits based on modified adjusted gross income. For 2024, single filers with a MAGI below $146,000 can contribute the full amount, while those earning between $146,000 and $161,000 can contribute a reduced amount. For married couples filing jointly, the full contribution range starts at $230,000 and phases out by $240,000. High earners above these thresholds cannot contribute directly to a Roth IRA, but may use a backdoor Roth strategy by making a non-deductible traditional contribution and then converting it.

Age and Contribution Limits

Prior to 2020, traditional IRA contributions stopped at age 70½. The SECURE Act removed that limit, so individuals of any age can now contribute as long as they have earned income. The annual contribution limit for 2024 is $7,000, or $8,000 if you are age 50 or older. These limits apply across all your IRAs combined, not per account.

Special Eligibility Situations

Certain groups face unique rules. Non-working spouses can contribute through a spousal IRA if the couple files jointly and has enough combined compensation. Adopted children and foster children with earned income can also open and fund an IRA. Survivors of a deceased spouse may be able to treat an inherited IRA differently, but contributions to an inherited account are generally not allowed. Individuals living abroad can still contribute, but must carefully calculate earned income under IRS reporting rules.