What is Contribution Limit?

A contribution limit is the maximum you can put into a retirement account in a given tax year. Limits are set by the IRS and adjusted for inflation. These limits are established by the Internal Revenue Code and are adjusted annually by the IRS for inflation under Section 415. The limits are designed to prevent taxpayers from shielding unlimited amounts of income from federal taxation.

Contribution limits vary by plan type. For the 2026 tax year, the individual contribution limit for traditional and Roth IRAs is $7,500 (up from $7,000 in 2025), with a catch-up contribution limit of $1,100 for individuals 50 and older. The elective deferral limit for workplace plans (401k, 403b, 457) is $24,500 in 2026 ($23,500 in 2025), with a standard catch-up limit of $8,000 ($7,500 in 2025).

Exceeding these contribution limits results in an excess contribution penalty. Under IRS rules, excess contributions are subject to a 6% excise tax per year on the excess amount for each year it remains in the account. To avoid the penalty, taxpayers must withdraw the excess contribution and its associated earnings before the tax filing deadline.