What Is Considered Earned Income for IRA Contributions?

IRAs are one of the most accessible investment vehicles for retirement. It’s no wonder that over four in 10 households owned at least one IRA in 2023, according to the Investment Company Institute (ICI). IRAs are easy to manage, offer a path to retirement outside common employer-sponsored plans, such as 401(k)s, and have few barriers to entry.

However, eligibility requirements for a Roth IRA are limited to earned income. If you exceed a certain limit determined by the IRS, it can limit how much you contribute to your IRA annually.

So, what is considered earned income, and what are my Roth IRA contribution limits? Here’s everything you need to know.

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How Do Self-Directed IRA Contributions Work?

Self-directed IRAs are a specific type of individual retirement plan that follows many of the same rules and requirements as standard IRAs, whether Traditional or Roth, including contributions.

To contribute to an IRA, you must have an earned income. Earned income is simply any type of taxable income, such as wages, salaries, and tips.

Roth IRAs have specific income limits (listed below), which limit the amount of money certain individuals can contribute to their IRA.

If you (or your spouse) have an earned income, you simply open an account, link it to your savings or checking account, set up a contribution schedule, and choose the assets in which you want to invest.

What Types of IRA Contributions Are Considered Earned Income?

For a more specific definition of earned income, examples include:

Taxable wages, salaries, and tips.
Nontaxable combat pay.
Earnings from self-employment.
Income received as a statutory employee
Strike benefits paid to employees by a union
Disability benefits received prior to the age of retirement

What Types of Contributions Are Not Considered Earned Income?

On the other hand, earned income does not include:

Nontaxable employee pay, including adoption benefits and dependent care.
Unemployment compensation
Worker’s compensation benefits
Social security
Pensions and annuities
Welfare benefits

If you only receive income from the above sources, you will not meet the IRS’s earned income requirements and, therefore, cannot contribute to an IRA. However, if you are receiving supplemental income from any of the above sources, it will not impact your contribution limits.

IRA Contribution Limits

Due to the tax benefits that IRAs offer, the IRS limits how much you can contribute on an annual basis.
The 2024 IRA contribution limits are as follows:

$7,000 annually
Additional $1,000 annually if you are 50 or over, for a total of $8,000.

Note: Traditional and Roth IRAs are subject to the contribution limits above, but Roth IRAs have additional contribution restrictions, which are outlined below.

IRA contribution limits can change annually. Before the start of the new tax year, always check the most recent contribution guidelines to ensure your existing contribution schedule fits with IRS rules and your goals.

Pro Tip: Money moved from one IRA to another or from a qualified retirement account, such as a 401(k), does not count against your annual contribution limit. For instance, you can rollover funds from a 401(k) at any time during the year and still be able to contribute up to the annual IRA contribution limit set by the IRS.

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Roth IRA Income Limits

If you open a Roth IRA, your contribution limits are dictated by your income and tax-filing status. Use the table below to see how much you can contribute to your Roth IRA.

Income limits for Roth IRAs

Tax-filing status	Income	Contribution limit
If you are… Married filing jointly Qualifying widower	Less than $218,000	Full amount
	$218,000 or more but less than $228,000.	Reduced amount
	$228,000 or more	Zero
If you are… Married filing separately and lived with your spouse for any period during the tax year.	Less than $10,000	Reduced amount
	$10,000 or more	Zero
If you are… Filing single Head of household Married filing separately and did not live with your spouse for any period during the tax year.	Less than $138,000	Full amount
	$138,000 or more but less than $153,000	Reduced amount
	$153,000 or more	Zero

Traditional IRA Deduction Limits

If you have a Traditional IRA, you may be able to deduct a portion of your contributions. Note: Roth IRA contributions are not deductible.

Use the tables below to determine if you’re eligible for deductions and, if so, how much.

Deduction Limits for Traditional IRAs

If you file… Single Head of household	Equal to or less than $73,000	Full deduction
If you are… Single Head of household	More than $73,000 but less than $83,000	Partial deduction
If you are… SIngle Head of household	Equal to $83,000 or more	No deduction
If you are… Married filing jointly Qualifying widow(er)	Equal to $116,000 or less	Full deduction
If you are… Married filing jointly Qualifying widow(er)	More than $116,000 but less than $136,000	Partial deduction
If you are… Married filing jointly Qualifying widow(er)	Equal to $136,000 or more	No deduction
If you are… Married filing separately	Less than $10,000	Partial deduction
If you are… Married filing separately	Equal to $10,000 or more	No deduction

Contributing to an IRA is a great way to save for retirement. However, based on the amount of income you make, you may be limited in how much you can contribute (Roth) or deduct from your taxes (Traditional) annually.

FAQs

Can I contribute to an IRA if I don’t have earned income?

If you have a spouse who meets the IRA earned income requirements, you may be able to contribute to an IRA. However, you cannot contribute to an IRA if you do not have earned income or a spouse with earned income.

Are there income limits for contributing to a Traditional IRA?

No, there are no income limits for contributing to a Traditional IRA. The only income-driven requirement is that you must have a source of earned income as defined by the IRS. If you have a Roth IRA, there are income limits that can limit your contribution. Always check the latest IRS guidelines to ensure your IRA remains in compliance.

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