An individual retirement account is one of the most accessible tools for retirement saving, open to anyone with earned income, not just those with an employer plan. Yet the rules on contribution limits, deadlines and tax deductions trip up many savers. Here is how they work for the 2026 tax year.
The Basics
An IRA is an account, not an investment. It can be held at a bank, brokerage or other custodian, and the money inside can be invested in stocks, bonds, funds and other approved assets. The tax advantage is the point: contributions to a traditional IRA may be deductible, and earnings grow without annual tax until withdrawal. A Roth IRA works differently, a subject another article in this series covers.
To contribute, a person generally needs taxable compensation, such as wages or self-employment income. A nonworking spouse can often contribute through a spousal arrangement if the couple files jointly and has enough income.
The 2026 Limits
For 2026, the IRS raised the IRA contribution limit to $7,500, up from $7,000. Savers age 50 and older can add a catch-up contribution of $1,100, up from $1,000, for a total of $8,600, according to the IRS announcement as reported by InvestmentNews. The catch-up amount is now adjusted for inflation under the SECURE 2.0 Act.
The limit applies across all of a person's IRAs combined, not to each account. A saver cannot put $7,500 into a traditional IRA and another $7,500 into a Roth, but can split a total of $7,500 between them. Contributions also cannot exceed taxable compensation for the year.
The Deadline
Contributions for a given tax year can generally be made until the filing deadline the following April. For 2026, that means contributions can be made through April 15, 2027, though savers should tell their custodian which tax year the deposit is for. Waiting until the deadline means money has less time to be invested, which is one reason some savers contribute earlier.
When Contributions Are Deductible
Anyone with earned income can contribute to a traditional IRA. Whether the contribution is tax-deductible depends on income and on whether the saver or a spouse is covered by a workplace retirement plan.
For 2026, a single filer covered by a workplace plan can claim a full deduction with income below $81,000, a partial deduction between $81,000 and $91,000, and no deduction above that, according to ConsumerAffairs' summary of the IRS limits. For married couples filing jointly, if the spouse making the contribution is covered at work, the phase-out range is $129,000 to $149,000, the IRS said, as reported by 401(k) Specialist. Someone who is not covered by a workplace plan can generally deduct contributions regardless of income, though other rules apply when a spouse has a plan.
A nondeductible contribution is still allowed above those thresholds, but it requires tracking on IRS Form 8606 so that the money is not taxed twice later.
Withdrawals and the Cost of Taking Money Early
Distributions from a traditional IRA are generally taxed as ordinary income. Withdrawals before age 59½ typically add a 10 percent early-withdrawal penalty, with exceptions the IRS lists. Traditional IRA owners must also generally begin taking required minimum distributions in their early 70s.
Rollovers
IRAs are also a common destination for money leaving an employer plan. A direct rollover from a 401(k) to an IRA generally avoids immediate tax. The IRS and the Department of Labor both offer guidance on rollovers, and a mistake, such as taking a check and missing a deadline, can trigger taxes and penalties.
Practical Cautions
Investment choices inside an IRA carry the same market risk as any other account, and gains are not guaranteed. Fees vary by custodian and by fund. Certain assets, including collectibles, are generally prohibited in IRAs, though the IRS carves out exceptions for some precious metals, a topic for a later article.
Why the Rules Change
Contribution limits are indexed for inflation each year, and Congress periodically changes the rules, as it did in the SECURE 2.0 Act of 2022. Savers should confirm the figures for each tax year on IRS.gov, because the dollar amounts above apply only to 2026.
The Bottom Line
An IRA lets almost any worker with earned income build tax-advantaged savings, up to $7,500 in 2026, or $8,600 for those 50 and older. The harder part is the details: how much is deductible, when the deadline falls, and what happens when money comes out.
