By Sarah Brenner, JD
Director of Retirement Education
The tax season is upon us. This is the time when many people consider contributing to a retirement account. You may be interested in the Roth IRA, which offers the promise of tax-free withdrawals in retirement if you follow certain rules. If you are deciding whether a 2025 Roth IRA contribution is the right move for you, here are 5 tips to keep in mind:
1. Know the deadline. The deadline for making a prior year contribution to a Roth IRA for 2025 is April 15, 2026. If you have an extension to file your taxes, that does not give you more time. Sooner is better than later. Don’t wait until the last minute, because you never know what may happen. Be sure to let the IRA custodian know the year for which you are contributing.
Interesting fact: Who do you not have to tell about your Roth IRA contribution? That would be the IRS. There is no requirement that you report a Roth IRA contribution on your 2025 federal tax return. It is good practice, however, for you or your tax preparer to keep track of your Roth IRA contributions.
2. Understand your limits. If you were under age 50 in 2025, the maximum contribution that you may make to a Roth IRA for 2025 is $7,000. For those who reached age 50 in 2025, the maximum contribution limit is $8,000. The annual limit is aggregated for traditional and Roth IRAs. For example, you could contribute $5,000 to your Roth IRA and $2,000 to your traditional IRA. You may not contribute $7,000 to your traditional IRA and $7,000 to your Roth IRA for 2025.
3. Have taxable compensation or earned income. You or your spouse must have taxable compensation or earned income to make a Roth IRA contribution. Passive income such as investment income will not work. Social Security income will not work either.
4. Don’t count yourself out too soon. You are never too old to contribute to a Roth IRA. Do you already contribute to a retirement plan at work? That is not a problem. Your participation in your company plan does not affect your eligibility to make a Roth IRA contribution.
5. Consider the Back Door. Your income must be under certain limits to make a Roth IRA contribution. If your 2025 modified adjusted gross income (MAGI) exceeds $150,000 if you are single, or $236,000 if you are married filing jointly, your ability to contribute to a 2025 Roth IRA begins to be phased out.
If your income is too high, you might consider a back-door Roth IRA. You simply contribute to a traditional IRA, which has no income limits (but don’t forget the taxable compensation or earned income requirement), and convert. Sounds intriguing? Check with a knowledgeable tax or financial advisor to see if this is a good strategy for you. If you have pre-tax funds in any IRA, the pro-rata rule will apply to your Roth conversion and make part of your conversion taxable.
If you have technical questions you would like to have answered, be sure to submit them to mailbag@irahelp.com, to be answered on an upcoming Slott Report Mailbag, published every Thursday.
https://irahelp.com/5-tips-for-making-your-2025-roth-ira-contribution/