IRS Publication 590-A: Contributions to Individual Retirement Arrangements
IRS Publication 590-A is the definitive IRS guide to IRA contributions. It covers every rule you need to know: how much you can contribute each year, whether your Traditional IRA contribution is deductible, who can contribute to a Roth IRA and the income limits that apply, how spousal IRAs work for non-working spouses, and what happens when you contribute too much. Understanding these rules is essential for maximizing retirement savings while avoiding the costly 6% excess contribution penalty and prohibited transaction consequences that can disqualify your entire IRA.
Key Topics Covered in Publication 590-A
Traditional IRA Deductibility Rules
Whether your Traditional IRA contribution is deductible depends on your modified adjusted gross income (MAGI) and whether you (or your spouse, if married) are covered by a workplace retirement plan. For 2024, if you are covered: full deduction up to MAGI $77,000 (single), phased out between $77,000-$87,000 (single), and $123,000-$143,000 (MFJ). If you are not covered but your spouse is: your deduction phases out between $230,000-$240,000. If neither spouse is covered: full deduction regardless of income. Non-deductible contributions must be reported on Form 8606 to establish basis — failing to file Form 8606 results in double taxation when you take distributions.
Roth IRA Contribution Rules & Income Limits
Roth IRA contributions are never tax deductible, but qualified distributions — including all earnings — are entirely tax-free. For 2024, eligibility to contribute the full amount phases out at MAGI $146,000-$161,000 (single and head of household) and $230,000-$240,000 (MFJ). For married filing separately (if you lived with your spouse at any time during the year), the phaseout is $0-$10,000. The 5-year rule and age 59 1/2 requirement govern when earnings can be withdrawn tax-free. Contributions (but not earnings) can be withdrawn at any time tax- and penalty-free.
Contribution Limits & Catch-Up Provisions
The 2024 IRA contribution limit is $7,000 ($8,000 if age 50 or older). This is a combined limit across all Traditional and Roth IRAs — you cannot contribute $7,000 to each. The limit is per individual, not per account. Contributions must be made in cash (not securities or property) and must not exceed your taxable compensation for the year. Contributions for a tax year can be made up to the tax filing deadline (April 15), not including extensions. The IRS can impose a 6% excess contribution penalty each year the excess remains in the account.
Spousal IRA Rules
A non-working or low-earning spouse can contribute to an IRA based on the working spouse's compensation, provided they file a joint return. The working spouse must have enough earned income to cover both contributions. For 2024, a married couple can contribute up to $14,000 ($16,000 if both are 50+) even if only one spouse works. The deductibility of the non-working spouse's Traditional IRA contribution depends on whether the working spouse is covered by a workplace retirement plan and the couple's combined MAGI.
The Savers Credit (Retirement Savings Contributions Credit)
Low-to-moderate income taxpayers who contribute to an IRA, 401(k), or other qualified retirement plan may qualify for the Savers Credit — a non-refundable tax credit of 10%, 20%, or 50% of contributions up to $2,000 ($4,000 MFJ). For 2024, the credit phases out at AGI above $38,250 (single), $57,375 (head of household), and $76,500 (MFJ). The maximum credit is $1,000 per person ($2,000 MFJ). The credit is claimed on Form 8880 and is in addition to any deduction for Traditional IRA contributions.
Common IRA Contribution Problems & Solutions
Excess Contribution 6% Penalty
Contributing more than the annual limit, or contributing to a Roth IRA when income exceeds the phaseout range, triggers a 6% excise tax on the excess amount. This penalty applies each year the excess remains in the account — not just the year of the contribution. Correction options: withdraw the excess (plus earnings) by the tax filing deadline including extensions, or apply the excess as a contribution to a future year (which does not eliminate the 6% penalty for the year it was made). Form 5329 reports the penalty.
Recharacterization: Traditional to Roth or Vice Versa
You can recharacterize a contribution — treat a contribution made to one type of IRA as having been made to the other type — by transferring the contribution plus earnings to the other IRA by the tax filing deadline plus extensions. This is useful if you contributed to a Roth IRA but later realized your income exceeded the limit, or if you contributed to a Traditional IRA and later want Roth treatment. Recharacterization is not the same as a Roth conversion; recharacterization treats the contribution as if it was originally made to the receiving IRA.
Prohibited Transactions That Disqualify IRAs
Using IRA assets for personal benefit — borrowing from your IRA, using IRA assets as loan collateral, selling property to your IRA, or receiving unreasonable compensation for managing it — constitutes a prohibited transaction. The penalty is severe: the entire IRA is treated as distributed on the first day of the tax year of the prohibited transaction, triggering income tax and potential early withdrawal penalties on the full account balance. This is one of the most catastrophic mistakes an IRA owner can make.
Forgotten Non-Deductible Contributions & Double Taxation
When you make non-deductible Traditional IRA contributions and fail to file Form 8606, the IRS has no record of your after-tax basis. When you later take distributions, the IRS taxes 100% of the withdrawal as ordinary income — effectively taxing the same dollars twice. Form 8606 establishes your cost basis so that only the pre-tax portion (earnings and deductible contributions) is taxed on distribution. Late-filed Forms 8606 can correct past omissions, though the IRS may assess a $50 penalty per late form.
Contribution Timing & the April 15 Deadline
IRA contributions for a given tax year can be made from January 1 of that year through the tax filing deadline (typically April 15 of the following year). Contributions made between January 1 and April 15 must be designated for the prior year or the current year — the IRA custodian must be instructed which year the contribution applies to. Failure to designate can result in the contribution being reported for the wrong year, potentially triggering excess contribution issues.
Ineligible Compensation & No-Earned-Income Rules
IRA contributions cannot exceed your taxable compensation (earned income) for the year. Earned income includes wages, salaries, tips, self-employment income, and alimony under pre-2019 divorce agreements. It does NOT include passive income — rental income, interest, dividends, capital gains, pension payments, or Social Security. A taxpayer with only investment or retirement income generally cannot make IRA contributions. The spousal IRA exception allows contributions based on a working spouse's earned income when filing jointly.