tax advantaged accounts: contribution limits and phase outs in one place

In short

A friend of mine once kept a shoebox of tax papers and called it a plan. If you are holding a similar box, this page is for you. Each tax advantaged account has a yearly cap, set by law and posted by the IRS. Some accounts also shrink what you may put in once your income climbs past a set range, which is called a phase out. The caps move from year to year, so check the current figure before you send a dollar. Your own income decides which door is open, and that is worth knowing early. A few minutes now can save you a letter from the IRS later.

The whole of it

What it is

I once watched a neighbor fill a rain barrel with a garden hose, and he was careful never to let it spill. That is a fair picture of a contribution limit. The law builds a barrel for each kind of account, and the barrel holds only so much each year. A tax advantaged account is one where the government gives some break on the money inside. The break might come when the money goes in, as it does with a traditional 401(k) or a traditional IRA. It might come when the money comes out, as it does with a Roth IRA. Or it might come both times, as it can with a health savings account.

You have probably heard the names before. The 401(k) is the plan many employers offer, and the 403(b) is its cousin at schools and nonprofits. The IRA is the account you open on your own at a bank or brokerage. The SEP IRA is for self employed people and small business owners. The HSA pairs with certain health plans. The 529 helps families pay for school. Each has its own barrel, and the barrels do not all match.

A phase out is the part that surprises folks. Picture the barrel shrinking as your income rises. Below a set income, the full barrel is yours. Above a higher income, the barrel may close entirely for that account. In between, the amount you may add slides down a little at a time. The word the IRS uses is modified adjusted gross income, or MAGI. That is your adjusted gross income with a few items added back, and it is the number the phase outs watch.

How it works

If you are holding a pay stub and wondering where to start, begin with the employer plan. For a 401(k) or 403(b), the employee may put in up to the current figure, which the official source publishes each year this year. People who are the current figure, which the official source publishes each year or older may add a catch up amount of the current figure, which the official source publishes each year on top. Many plans also add an employer match, and that money counts toward a separate overall limit of the current figure, which the official source publishes each year. The employee limit and the overall limit are two different gauges. Mixing them up is an easy mistake.

IRAs work a little differently. The limit for a traditional or Roth IRA is $7,500 for 2026 (source, checked 10/4/2026), with a catch up amount of the current figure, which the official source publishes each year for those the current figure, which the official source publishes each year or older. The limit is shared. If a person puts part in a traditional IRA and part in a Roth IRA, the two together must stay under the one cap. The person also needs earned income at least as large as the amount put in, such as wages or self employment pay.

Now the phase outs. For a Roth IRA, the ability to contribute shrinks as MAGI rises through a range. For a single filer, that range starts at the current figure, which the official source publishes each year and ends at the current figure, which the official source publishes each year. For married couples filing together, it runs from the current figure, which the official source publishes each year to the current figure, which the official source publishes each year. A traditional IRA has no income cap on contributing. But the tax deduction for it can phase out when the worker, or a spouse, is covered by a plan at work. The ranges for that deduction have their own figures, such as the current figure, which the official source publishes each year for a single filer with a workplace plan.

An HSA has its own gauge. The limit is the current figure, which the official source publishes each year for self only coverage and the current figure, which the official source publishes each year for family coverage. The person must be in a qualifying high deductible health plan to use it. The SEP IRA lets an employer, including a self employed person, put in the lesser of a set percent of pay or a dollar cap of the current figure, which the official source publishes each year. The IRS spells out the percent for each type of worker.

The numbers, and where to find yours

I like to tell folks that the best figure is the one you looked up yourself. These limits change, so none of the ones above should be taken from memory. The IRS posts the new figures each year in a notice about cost of living adjustments for retirement plans. Its Publication 590-A covers IRA contributions, and Publication 969 covers HSAs. The Form 1040 instructions explain how to find your MAGI. For a 401(k), your plan administrator can tell you how much you have put in so far this year. Your pay stub often shows it too.

Your MAGI is the number that matters most for the phase outs. Start with the adjusted gross income on your tax return. The IRS worksheet in Publication 590-A tells you which items to add back. Do that before you decide which account fits. A pencil and a printed copy of last year's return will take you most of the way.

A worked example

Let me tell you about a woman named Dana. She is 34, single, and earns $52,000 a year. Her employer offers a 401(k) with a match of 3 percent of pay. Dana wants to use her accounts well, so she starts with the match.

Three percent of $52,000 is $1,560. To get the whole match, Dana puts in 3 percent herself, which is also $1,560. That makes $3,120 going into the plan in one year, and $1,560 of it is the employer's money. Her own part is far below the employee limit of the current figure, which the official source publishes each year, so she has plenty of room.

Next, Dana looks at a Roth IRA. Her MAGI is about $50,000, which sits well under the start of the single phase out, the current figure, which the official source publishes each year. So she may put in the full $7,500 for 2026 (source, checked 10/4/2026). Say she chooses $3,000, which is $250 a month for 12 months. Twelve months at $250 a month is $3,000. Her earned income of $52,000 is much more than $3,000, so that test is met.

Add it up. Dana's own saving is $1,560 in the 401(k) plus $3,000 in the Roth IRA, which is $4,560. The employer adds $1,560. Her total for the year is $6,120. If that grew at 5 percent a year with no new deposits, $6,120 would become about $6,426 after one year. That is $6,120 times 1.05. It is a plain illustration of the arithmetic, not a forecast of any return.

Then something happens. Dana gets a raise to $90,000. Her MAGI climbs, and she checks the phase out range again. Her new MAGI is now inside the range, so her Roth limit shrinks. She does the math from the IRS worksheet instead of guessing. That small habit keeps her out of trouble.

Where it goes wrong

I once knew a man who put too much into an IRA and did not find out until spring. It happens more than you might think. The most common slip is going over the limit in an account. The IRS charges an excise tax on the excess each year it stays in. The fix is to take out the extra amount, and any earnings on it, before the tax filing deadline. The IRS explains the steps in Publication 590-A.

Another slip is forgetting that the IRA limit is shared. A person who funds a traditional and a Roth IRA must count both toward one cap. Changing jobs can cause trouble too. An employee who works for two employers in one year may put in more than the employee limit across two plans. The limit follows the person, not the plan. Each plan only sees its own deposits.

Income can sneak up on a person as well. A bonus, a side job, or a sale of stock can lift MAGI into a phase out range. That can shrink a Roth contribution or a deduction without any warning. It helps to check MAGI in the fall, while there is still time to act. And the last point is plain. Dates matter. Deadlines for contributing differ by account, so look them up.

Questions to answer before you leave this page

Have you looked up the current limit for each account you use, instead of trusting an old number from memory? Do you know your MAGI, and have you compared it to the phase out range for your filing status? Is your employer match being captured in full, and have you checked your pay stub to see how much you have put in this year? If you are the current figure, which the official source publishes each year or older, does your plan allow the catch up amount? Are you funding more than one IRA, and do the two together stay under the single cap? Have you asked your plan administrator or a tax professional about anything that still feels unclear? And do you know the deadline for each account, so a missed date does not cost you a year of room?