The April 15 tax deadline is less than a week away, and it doubles as the final day to make a 2025 IRA contribution. Fidelity Investments flags a mistake that catches savers off guard every year during the last-minute deposit rush.

Average IRA contributions jumped 18% during the two weeks before March 20 compared to the previous five weeks, Fidelity data cited by CNBC show. Nearly three-quarters of those deposits flowed into after-tax Roth IRAs, where income eligibility rules are strict and unforgiving.

The problem is that many contributors do not understand the number that determines whether they can legally contribute at all. Getting it wrong does not simply void your deposit; it triggers a recurring tax penalty that compounds every year you ignore the error.

If you plan to make a 2025 IRA contribution before the deadline, there is one calculation you need to complete before moving a dollar.

Fidelity says most savers overlook this IRA eligibility number

The trap Fidelity is warning about centers on modified adjusted gross income (MAGI), a tax calculation that most people misunderstand or skip entirely.

Your eligibility for Roth IRA contributions depends on your MAGI, and many investors overestimate how much they can deposit. “Know your numbers” before you contribute, Rita Assaf, vice president of retirement offerings at Fidelity Investments, told CNBC.

Part of the struggle is that eligibility hinges on MAGI, which is confusing to calculate, Assaf explained in the same interview. Your MAGI starts with your adjusted gross income on line 11a of your tax return, then adds back deductions such as student loan interest. The final number determines exactly how much you can legally contribute to a Roth IRA for the 2025 tax year.

For single filers, you can contribute the full $7,000, or $8,000 if you are 50 or older, only if your MAGI stays below $150,000. The contribution limit phases down as income rises and disappears entirely at $165,000, according to the IRS. Married couples filing jointly face a phaseout range of $236,000 to $246,000 for the 2025 tax year.

The 6% penalty that hits you every year until you fix it

Contributing more than your eligible amount to a Roth IRA triggers a 6% excise tax on the excess, and this is not a one-time fee. The IRS charges this penalty every year the excess funds remain in your account, which means ignoring the problem only makes it more expensive.

Consider a single filer who deposited $7,000 into a Roth IRA but earned a MAGI above $165,000 for the 2025 tax year. The entire contribution would be treated as excess, resulting in a $420 penalty in the first year and again in every subsequent year.

You have until your tax filing deadline, including extensions, to remove excess contributions and any earnings those funds generated, Vanguard indicates. Those earnings must be reported as income on your tax return, and you will likely owe taxes on them.

If you miss the correction window, you may need to file an amended return and keep paying the 6% penalty until you resolve the issue, Fidelity warns.

That 6% Roth IRA penalty keeps compounding every year, turning a small mistake into a growing cost until you fix the excess contribution.

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Traditional IRA deductions face their own income restrictions

The Roth IRA is not the only account with MAGI-based restrictions that catch people off guard before Tax Day arrives. Traditional IRA contributions are available to anyone with earned income, but the tax deduction depends on your income and employer plan participation.

If you participate in an employer-sponsored plan like a 401(k), your traditional IRA deduction phases out starting at $79,000 for single filers.

The deduction disappears entirely at $89,000, and married couples filing jointly face a phaseout range between $126,000 and $146,000 when the contributing spouse has an employer plan, according to Fidelity’s contribution limits guide.

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If your spouse participates in a workplace plan but you do not, you can still claim the full traditional IRA deduction below $236,000 joint MAGI. The deduction phases out between $236,000 and $246,000, and disappears for joint filers above that ceiling during the 2025 tax year.

You can still make a nondeductible contribution even if your income exceeds the deduction threshold, but you must report it on IRS Form 8606. Failing to file this form can create confusion when you eventually take distributions and may result in a $50 penalty per occurrence.

Your practical IRA deadline is earlier than April 15

April 15 is the official cutoff, but financial professionals recommend treating April 1 as your real deadline for IRA contributions. “I tell people that the practical deadline is April 1,” Rob Burnette, investment advisor and tax preparer at Outlook Financial Center, told CNBC. 

He emphasized that leaving a two-week buffer ensures your transaction clears and is properly recorded by your custodian. Contributions made between January 1 and April 15 of this year can apply to either the 2025 or 2026 tax year at your discretion.

You must clearly designate the year to which the deposit applies at the time you make the contribution to your financial institution. 

“Roth IRAs offer more opportunities… You have the Roth 401(k)s, you have even 529 to Roth, Roth Sep, Roth Simple, Roth matching, Roth catch-up. Congress went Roth crazy. Why? Because they need the revenue. They get the money up front. So let’s take advantage of their shortsightedness,” Ed Slott, founder of Ed Slott and Company, told Investment News.

If you skip this step, your custodian will likely default the contribution to 2026, which could cost you a full year of retroactive tax benefits. “If you’re writing a check, just make sure you put in the memo box that it’s a contribution for that tax year,” Burnette told CNBC.

He added that you should log in to your account afterward and confirm that your custodian credited the contribution to the correct tax year. 

If the custodian makes an error, you need to resolve it before the April 15 deadline passes, or the window will close permanently for 2025 contributions. Filing a tax extension pushes your filing deadline to October 15, but it does not extend your IRA contribution deadline by a single day. 

Your 2025 IRA contribution must arrive by April 15, 2026, regardless of whether you request an extension for your tax return filing. Missing this distinction is one of the most common and costly planning errors that Fidelity sees among last-minute contributors every spring.

3 moves to make before the April 15 IRA deadline

If you still plan to contribute to an IRA for the 2025 tax year, these steps will help you avoid the most common and costly errors.

Steps to protect your IRA contribution:

1. Calculate your 2025 MAGI before you contribute. Use line 11a of your tax return as the starting point, then add back deductions for student loan interest and IRA contributions. Compare your final number to the IRS income thresholds for your filing status to confirm your eligibility before depositing any money into the account.
2. Choose the right account type based on your tax situation. If your MAGI exceeds the Roth IRA income limits, consider a traditional IRA contribution or a nondeductible IRA as your alternative. A nondeductible traditional IRA can serve as the first step in a backdoor Roth conversion strategy that higher earners often use to access Roth benefits.
3. Make your contribution by April 1 to allow time for processing. Designate the contribution as applying to the 2025 tax year when you submit it to your financial institution or brokerage account. Log in after the deposit clears and confirm the custodian recorded it for the correct year to avoid any complications down the road.

The Saver’s Credit may also reduce your tax bill if your adjusted gross income falls below $39,500 for single filers in 2025. Married couples filing jointly qualify if their combined AGI stays below $79,000 for the same tax year, according to the IRS.

This credit provides a dollar-for-dollar reduction in your tax burden, making it one of the most valuable retirement-related tax breaks available.

Fidelity’s warning signals a broader shift in how Americans save for retirement

The last-minute IRA contribution rush is growing in scale and increasingly favoring Roth accounts over traditional IRAs, Fidelity’s research shows. Nearly 75% of recent IRA deposits went into Roth IRAs, reflecting a broader shift among savers toward building tax-free retirement income.

Roth IRA earnings grow tax-free, and qualified withdrawals are entirely income-tax-free once you reach age 59-and-a-half and satisfy the five-year holding requirement. Unlike traditional IRAs, Roth accounts are not subject to required minimum distributions during the original account holder’s lifetime, which makes them a powerful wealth-transfer tool.

For the 2026 tax year, the IRA contribution limit rises to $7,500 for those under 50 and $8,600 for savers aged 50 and older. The Roth IRA income phaseout also increases, with single filers qualifying for full contributions below $153,000 and married couples below $242,000, according to the IRS. 

You can begin contributing toward your 2026 limits as early as Jan. 1, 2026, and the deadline extends to April 15, 2027.

Related: Fidelity flags the Roth IRA loophole high earners need