Retirement accounts are one of the most effective tax tools available to individuals. Contributions to a traditional 401(k) or IRA can lower today's taxable income, and contributions to a Roth account can grow and be withdrawn tax-free later if the rules are met. Limits and income thresholds change every year. This guide gives the official 2025 and 2026 numbers and explains how the rules fit together.
Contribution limits
| Item | 2025 | 2026 |
|---|---|---|
| 401(k), 403(b), governmental 457(b) and TSP employee deferral | $23,500 | $24,500 |
| Catch-up, age 50 and older | $7,500 | $8,000 |
| Catch-up, ages 60 to 63 (instead of the regular catch-up) | $11,250 | $11,250 |
| SIMPLE IRA or SIMPLE 401(k) deferral | $16,500 | $17,000 |
| IRA (traditional and Roth combined) | $7,000 | $7,500 |
| IRA catch-up, age 50 and older | $1,000 | $1,100 |
| Total employer plus employee limit, defined contribution plans | $70,000 | $72,000 |
The employee deferral limit applies to all of your 401(k), 403(b) and similar plans combined, not per employer. Your IRA limit also cannot exceed your taxable compensation for the year, with a special rule that lets a working spouse fund an IRA for a spouse with little or no income.
New Roth catch-up rule for higher earners
Beginning in 2026, if you are in a plan that offers Roth contributions and your prior-year wages from the plan sponsor were more than $150,000 (for 2026), your catch-up contributions must be made on a Roth basis. That means no up-front deduction but tax-free qualified withdrawals later. Employers handle the details, so ask your plan administrator how your plan implements this.
Who can deduct a traditional IRA contribution
Anyone with compensation can contribute to a traditional IRA, but the deduction can be reduced if you or your spouse is covered by a retirement plan at work. The deduction phases out between these modified AGI amounts:
| Situation | 2025 phase-out | 2026 phase-out |
|---|---|---|
| Single or head of household, covered by workplace plan | $79,000 to $89,000 | $81,000 to $91,000 |
| Married filing jointly, contributing spouse covered | $126,000 to $146,000 | $129,000 to $149,000 |
| Married filing jointly, contributing spouse not covered but other spouse is | $236,000 to $246,000 | $242,000 to $252,000 |
| Married filing separately, covered | $0 to $10,000 | $0 to $10,000 |
If neither spouse is covered at work, the deduction is not limited by income.
Who can contribute to a Roth IRA
Roth IRA contributions are not deductible. The ability to contribute phases out at higher income:
| Filing status | 2025 phase-out (modified AGI) | 2026 phase-out (modified AGI) |
|---|---|---|
| Single, head of household, or separate filer who lived apart all year | $150,000 to $165,000 | $153,000 to $168,000 |
| Married filing jointly or qualifying surviving spouse | $236,000 to $246,000 | $242,000 to $252,000 |
| Married filing separately and lived with spouse | $0 to $10,000 | $0 to $10,000 |
Above the top of the range you cannot contribute directly. Some people use a conversion, which is covered in our guide to Roth conversions.
Example: Marcus, 52, is single with modified AGI of $85,000 in 2026 and is covered by a 401(k) at work. His traditional IRA deduction phases out between $81,000 and $91,000, so he can deduct about 60% of a $7,500 contribution. He could also choose a Roth IRA, since his income is under $153,000, and contribute up to $8,600 in total with the age-50 catch-up.
The saver's credit
Lower-income workers may get a credit of up to $1,000 ($2,000 if filing jointly) for contributions to an IRA or workplace plan, on top of any deduction. For 2025 your AGI cannot exceed $79,000 (married filing jointly), $59,250 (head of household) or $39,500 (all others). For 2026 the limits are $80,500, $60,375 and $40,250. The credit is not available to full-time students or to people claimed as dependents.
Deadlines and common mistakes
Workplace deferrals must come out of pay during the calendar year. Contributions to an IRA can be made until the filing deadline, not counting extensions. Excess contributions are subject to a 6% excise tax each year until corrected. See retirement excess contribution penalties. Taking money out before age 59½ can trigger a 10% additional tax unless an exception applies. See early withdrawal penalty. Required minimum distributions generally begin at age 73.
Other common mistakes include contributing to a Roth IRA with income above the limit, forgetting to track nondeductible contributions on Form 8606, and overcontributing across several jobs.
Illinois
Illinois starts from federal adjusted gross income, so a deductible IRA contribution reduces Illinois income as well, and the Illinois Department of Revenue allows a subtraction for federally taxed retirement income. See our Illinois guide.
How we can help
We coordinate 401(k) deferrals, IRA contributions and conversions across the year, help you check the deduction and Roth limits and file Form 8606 when needed. Business owners should see retirement plans for business owners. Learn about tax planning or contact us.
Frequently asked questions
Can I contribute to both a 401(k) and an IRA?
Yes. The limits are separate. Your IRA deduction may be limited if you are covered by the 401(k) and your income is above the phase-out range.
Can I still make a 2026 IRA contribution after December 31?
Yes. You can make 2026 IRA contributions until April 15, 2027, but workplace plan deferrals must come from pay earned during 2026.
What is the difference between a Roth and a traditional 401(k)?
Traditional deferrals reduce your income now and are taxed when withdrawn. Roth deferrals are taxed now and, if the rules are met, withdrawn tax-free.
Does the Roth catch-up rule apply to everyone?
No. It applies to participants whose prior-year wages from the plan sponsor exceeded the threshold, which is $150,000 for 2026, in plans that offer Roth contributions.
Official sources
- IRS: Notice 2025-67, 2026 amounts relating to retirement plans and IRAs
- IRS: Publication 590-A (2025), Contributions to IRAs
- IRS: Retirement topics - Catch-up contributions
- IRS: Publication 17 (2025), What's New
This page is a plain-language summary. The official source controls if there is any difference.
General information only, not tax, legal or accounting advice for your situation. Rules, limits and deadlines change; confirm the current rules with the official source or a qualified professional before you act. Reading this page does not create a professional relationship with CPA Tax Payroll and Accounting Corp.