Learn how Traditional IRA contributions, deductions, basis, withdrawals, Roth conversions and required minimum distributions work.
A traditional IRA is an individual retirement arrangement that can provide tax-deferred investment growth. A contribution may be deductible, partly deductible, or nondeductible depending on income, filing status, and workplace-retirement-plan coverage. Distributions are generally taxable except to the extent the owner has after-tax basis.
An IRA is an account type, not an investment. Cash in the IRA may be invested in permitted assets offered by the custodian. Opening an account does not by itself create a deduction, and a contribution does not automatically mean the money was invested.
An individual generally needs taxable compensation, such as wages or net self-employment income, to make a regular contribution. A joint-return spousal IRA rule may allow a contribution for a spouse with little or no compensation when the couple has enough combined compensation.
For 2026, total regular contributions to all of a person's traditional and Roth IRAs generally cannot exceed:
The limit is shared. Contributing $4,000 to a traditional IRA leaves at most $3,500 for a Roth IRA for 2026 before considering age, compensation, income phaseouts, and other contributions.
The contribution deadline is generally the federal return due date, not including extensions. The contribution should be clearly designated for the correct tax year. Annual limits and deadlines require review.
For 2026, when the contributor is covered by a workplace plan, the federal deduction phaseout is generally:
If the contributor is not covered but is married to someone who is, the joint-return phaseout is generally $242,000 to $252,000. These thresholds are annual and the applicable modified AGI formula must be followed.
A taxpayer outside the deduction range may still make a nondeductible contribution if otherwise eligible. That choice creates basis that must be tracked.
Taylor contributes $7,500 to a traditional IRA for 2026. If Taylor qualifies for a full deduction, the contribution can generally reduce federal adjusted gross income, while later distributions are generally taxable.
If only $2,500 is deductible, the remaining $5,000 is a nondeductible contribution. Taylor should report that basis on Form 8606. The custodian's Form 5498 does not replace Form 8606 or the taxpayer's cumulative basis records.
A distribution is generally included in income except for the portion representing basis from nondeductible contributions. When basis exists, the taxpayer generally cannot choose to withdraw only after-tax dollars. The pro rata calculation looks across traditional, SEP, and SIMPLE IRAs and considers year-end balances, distributions, and conversions.
An early taxable distribution before age 59½ may also face a 10% additional federal tax unless an exception applies. An exception to the additional tax does not necessarily make the distribution nontaxable.
Traditional IRA owners generally must begin required minimum distributions under the age rules applicable to their birth year. Current IRS materials state that RMDs generally begin for the year the owner reaches age 73, with later starting ages applying to some younger birth cohorts under current law. The first-payment timing option can bunch two distributions into one tax year, so planning matters.
A traditional IRA may be converted to a Roth IRA. The converted amount is generally taxable except to the extent allocated basis makes part nontaxable. A conversion is not a regular Roth contribution and is not subject to the annual Roth contribution income limit, but the pro rata basis rule still applies.
A rollover moves eligible retirement funds without treating the movement as an ordinary contribution when the requirements are met. Direct trustee-to-trustee transfers can avoid several complications. Indirect 60-day rollovers, once-per-12-month limitations for certain IRA-to-IRA rollovers, withholding, and required-minimum-distribution rules require care.
Keep every Form 8606 permanently with retirement records. A missing basis history can cause the same contribution to be taxed twice.
California often follows the federal framework but has historical and current nonconformity that can create different IRA deductions or basis. FTB Publication 1005 provides California IRA and pension guidance, including worksheets for distributions and Roth conversions when California basis differs.
One current difference is California's nonconformity to the federal post-2019 repeal of the maximum age for traditional IRA contributions. California also does not conform to the federal 529-to-Roth IRA rollover provision. These differences can require Schedule CA (540) adjustments and separate California basis tracking.
Heath Income Tax can review IRA deduction eligibility, Form 8606 basis, distributions, conversions, and California adjustments before filing.
Can I contribute if I have a 401(k)?
Often yes. Workplace coverage may limit the deduction rather than the contribution itself.
Are traditional IRA withdrawals always taxable?
No. Properly documented after-tax basis can make part nontaxable.
Can I deduct a contribution made after year-end?
A qualifying contribution made by the regular deadline can generally be designated for the prior tax year.
Does a filing extension extend the contribution deadline?
Generally no.
The definitions and examples on this page are for informational purposes only and do not constitute tax advice. Tax laws change frequently and individual circumstances vary. Consult a qualified tax professional before making decisions based on this content.
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