IRA Rules and Regulations: Limits, Withdrawals, and RMDs

The rules and regulations governing an Individual Retirement Arrangement (IRA) set annual contribution caps, restrict who can deduct or contribute based on income, penalize most withdrawals before age 59½, and force taxable payouts starting at age 73 for traditional accounts. For 2026, you can put in up to $7,500 across all your IRAs, or $8,600 if you’re 50 or older, and pulling money out early generally triggers a 10% additional tax on top of ordinary income tax. The specifics differ sharply between traditional and Roth accounts, and inherited IRAs follow their own timeline.

Who Can Contribute and How Much

You need earned income to contribute. Wages, salaries, tips, and self-employment income all qualify; rental profits, interest, and dividends don’t.¹ Your contribution can’t exceed your taxable compensation for the year, even when the dollar cap would otherwise allow more.

The 2026 limit is $7,500, plus a $1,100 catch-up if you’re 50 or older by year-end, for a total of $8,600.² That cap covers all your traditional and Roth IRAs combined. Opening extra accounts at different brokerages doesn’t multiply the limit.

You have until the tax filing deadline of the following year to fund the account. For 2026 contributions, that means April 15, 2027.³ Contribute too much and the IRS charges a 6% excise tax on the excess every year it sits in the account.⁴

Spousal Contributions

A married couple filing jointly can fund an IRA in a non-earning spouse’s name using the working spouse’s compensation. Each spouse can contribute up to the full annual limit as long as combined earned income covers both.⁴ A one-income household can still put away up to $17,200 a year across two accounts in 2026.

Traditional IRA Deduction Rules

Traditional contributions may be deductible, reducing your taxable income the year you contribute. Full, partial, or no deduction depends on your income and whether you or your spouse is covered by a workplace retirement plan.⁵

For 2026, when you’re covered by a workplace plan:²

Single filers get a full deduction below $81,000 MAGI, a partial deduction between $81,000 and $91,000, and none at $91,000 or above.
Married filing jointly, contributing spouse covered: full below $129,000, partial from $129,000 to $149,000, none at $149,000 or above.
Married filing jointly, contributing spouse not covered but the other is: partial deduction between $242,000 and $252,000.
Married filing separately and covered by a plan: partial deduction between $0 and $10,000, a range that never adjusts for inflation.

If neither spouse participates in a workplace plan, traditional contributions are fully deductible at any income. Even where you can’t deduct, you can still make a nondeductible contribution, which sets up the backdoor Roth strategy below.

Roth IRA Income Limits

Roth IRAs flip the tax timing: after-tax dollars go in, and qualified withdrawals in retirement come out tax-free. The trade-off is an income ceiling on who can contribute at all.

For 2026:²

Single filers can contribute fully below $153,000 MAGI, a reduced amount from $153,000 to $168,000, and nothing at $168,000 or above.
Married filing jointly: full contribution below $242,000, reduced from $242,000 to $252,000, none at $252,000 or above.

The Backdoor Roth

Earners above the Roth thresholds can still get money in through a two-step maneuver: make a nondeductible contribution to a traditional IRA, then convert it to a Roth. Conversions have no income limit and no dollar cap.⁶

The pro-rata rule complicates it. If you hold any pre-tax dollars in traditional, SEP, or SIMPLE IRAs, the IRS treats a conversion as coming proportionally from your pre-tax and after-tax balances across all your non-Roth IRAs. You can’t isolate the nondeductible contribution and convert only that. The strategy works cleanest when your pre-tax IRA balance is zero.

Withdrawal Rules

Traditional IRA withdrawals before 59½ face a 10% additional tax on top of ordinary income tax on the distribution.⁷ Several exceptions waive the 10% penalty (though the income tax still applies to traditional distributions):⁸

Qualified higher education expenses for you, your spouse, children, or grandchildren.
A first-time home purchase, capped at $10,000 over your lifetime.
Unreimbursed medical expenses exceeding 7.5% of your adjusted gross income.
Health insurance premiums while unemployed, after receiving unemployment compensation for at least 12 consecutive weeks.
Total and permanent disability.
Substantially equal periodic payments, sometimes called 72(t) payments, taken as a series of roughly equal annual withdrawals based on your life expectancy.

SECURE 2.0 added a penalty-free emergency distribution starting in 2024. You can pull up to $1,000 a year for an unforeseeable personal emergency, but the withdrawal can’t drop the account below $1,000.⁹ If you don’t repay it or make new contributions equal to the amount taken, you’re locked out of another emergency distribution from that account for three years. The $1,000 cap is not indexed for inflation.

Roth Withdrawals and the Five-Year Rule

Roth accounts follow their own ordering. Distributions come out in a fixed sequence: contributions first, then conversion amounts, then earnings.¹⁰ You can take your original contributions out at any time, at any age, for any reason, tax- and penalty-free.

Earnings work differently. To withdraw them completely tax-free, two conditions must both be met: you must be at least 59½, and at least five years must have passed since January 1 of the tax year you first funded any Roth IRA. Miss either and earnings come out as taxable income, potentially with the 10% penalty. The five-year clock starts once for all your Roth IRAs and never resets, which is why opening an account early with even a small deposit can matter years later.

Required Minimum Distributions

Traditional IRA owners must begin taking required minimum distributions each year at age 73.¹¹ That age applies to anyone born between 1951 and 1959. If you were born in 1960 or later, the age rises to 75 starting in 2033.¹²

The RMD equals your account balance on December 31 of the prior year divided by a life expectancy factor from the Uniform Lifetime Table.¹³ Fail to take the full amount and you owe a 25% excise tax on the shortfall. Correct the mistake within two years and the penalty drops to 10%.¹¹

Roth IRAs carry no RMDs during the original owner’s lifetime, which makes them useful for controlling your tax bracket in retirement and passing money to heirs.

Qualified Charitable Distributions

Once you’re 70½ or older, you can send up to $111,000 in 2026 directly from your traditional IRA to a qualified charity.¹⁴ A qualified charitable distribution counts toward your RMD but doesn’t appear as taxable income. A married couple with separate IRAs can each give the full amount, up to $222,000 combined. The money has to move directly from the IRA custodian to the charity; withdrawing it first and writing a personal check doesn’t qualify.

Rollovers and Transfers

Moving retirement money between accounts comes in two flavors, and confusing them is expensive.

A direct transfer, also called a trustee-to-trustee transfer, moves money from one institution straight to another. You never touch it. There’s no limit on how often you can do this and no withholding.¹⁵ This is almost always the right choice.

An indirect rollover puts the money in your hands. You have 60 days to redeposit it into another IRA. Miss the window and the whole amount becomes a taxable distribution, plus the 10% penalty if you’re under 59½. You’re limited to one indirect rollover across all your IRAs in any 12-month period. Break that rule and the second rollover is treated as both a taxable distribution and an excess contribution, stacking penalties.

Rollovers from a 401(k) or similar employer plan carry an extra wrinkle: paying the distribution to you rather than transferring it directly triggers a mandatory 20% federal tax withholding. IRA-to-IRA distributions don’t. If your 401(k) rollover has 20% withheld and you want the full amount in the new IRA, you have to make up the withheld portion from other funds and reclaim it at tax time.

Inherited IRAs

What heirs can do with an inherited IRA depends on who they are.

Surviving Spouses

A spouse who is the sole beneficiary can roll the inherited IRA into their own and treat it as if it had always been theirs. Contribution and distribution rules then work normally, including delaying RMDs until age 73 or 75.¹⁶ The catch is that withdrawals before 59½ then face the standard 10% early withdrawal penalty.

Non-Spouse Beneficiaries

Most non-spouses who inherited an IRA from someone who died in 2020 or later must empty the account by December 31 of the 10th year after the owner’s death.¹⁶ There’s no annual minimum during those years. You can drain it in year one or wait until year ten, as long as it’s empty by the deadline.

A limited group of “eligible designated beneficiaries” can stretch withdrawals over their own life expectancy:

Minor children of the account owner, but only until they reach the age of majority, when the 10-year clock then starts.
Disabled or chronically ill individuals.
Beneficiaries no more than 10 years younger than the deceased owner.

When no person is named as beneficiary (for instance, when the estate is listed instead), the distribution timeline is generally shorter and less favorable. Keeping beneficiary designations current after marriages, divorces, births, and deaths is one of the more consequential decisions IRA owners make.

Prohibited Investments and Transactions

IRAs can hold most standard investments and, in a self-directed structure, real estate, private equity, and certain precious metals. The tax code draws hard lines around the rest.

Buying a collectible with IRA funds counts as an immediate taxable distribution equal to the purchase price.¹⁷ The category covers artwork, rugs, antiques, stamps, most coins, alcoholic beverages, and gems. Life insurance contracts can’t be held in an IRA either. Certain precious metals meeting minimum purity thresholds are the main exception, and they must sit with the IRA trustee rather than in a home safe.

The IRS also bans transactions between the IRA and “disqualified persons,” a group that includes you, your spouse, your ancestors, your descendants, and their spouses. You can’t sell property to your IRA, borrow from it, pledge it as collateral, or personally use anything it owns. Renting a vacation home held in your self-directed IRA is the classic mistake.¹⁸

The consequence is severe. A prohibited transaction strips the IRA of its tax-advantaged status as of January 1 of the year it occurred. The full account balance is then treated as a distribution, with income tax on the whole amount and the 10% penalty if you’re under 59½. One violation disqualifies the entire account.

Fixing an Excess Contribution

Putting in more than the limit, or contributing to a Roth when your income is too high, creates an excess contribution. The 6% excise tax compounds every year the excess remains. You avoid it by withdrawing the excess and any earnings it produced before your tax return due date, including extensions.⁶

Your custodian calculates the net income attributable to the excess: the gain or loss the overcontribution generated while sitting in the account. Those earnings are taxable in the year of the contribution, not the year of withdrawal. Correcting on time also spares the earnings from the 10% early withdrawal penalty. Miss the deadline and you can still reduce the excess by contributing less than the maximum in a future year and applying the difference, but the 6% keeps running until the excess is cleared.

1
Internal Revenue Service. Topic No. 451, Individual Retirement Arrangements (IRAs)
2
Internal Revenue Service. 401(k) Limit Increases to $24,500 for 2026, IRA Limit Increases to $7,500
3
Internal Revenue Service. IRA Year-End Reminders
4
Internal Revenue Service. Retirement Topics – IRA Contribution Limits
5
Office of the Law Revision Counsel. 26 USC 219 – Retirement Savings
6
Internal Revenue Service. Publication 590-A, Contributions to Individual Retirement Arrangements (IRAs)
7
Office of the Law Revision Counsel. 26 USC 72 – Annuities; Certain Proceeds of Endowment and Life Insurance Contracts
8
Internal Revenue Service. Retirement Topics – Exceptions to Tax on Early Distributions
9
Internal Revenue Service. Notice 2024-55, Certain Exceptions to the 10 Percent Additional Tax Under Code Section 72(t)
10
Internal Revenue Service. Publication 590-B, Distributions from Individual Retirement Arrangements (IRAs)
11
Internal Revenue Service. Retirement Plan and IRA Required Minimum Distributions FAQs
12
Congressional Research Service. Required Minimum Distribution (RMD) Rules for Original Owners of Retirement Accounts
13
Office of the Law Revision Counsel. 26 USC 401 – Qualified Pension, Profit-Sharing, and Stock Bonus Plans
14
Internal Revenue Service. Notice 2025-67, 2026 Amounts Relating to Retirement Plans and IRAs
15
Internal Revenue Service. Rollovers of Retirement Plan and IRA Distributions
16
Internal Revenue Service. Retirement Topics – Beneficiary
17
Office of the Law Revision Counsel. 26 USC 408 – Individual Retirement Accounts
18
Internal Revenue Service. Investments in Collectibles in Individually Directed Qualified Plan Accounts