Roth Catch-Up Contributions 2026: The $150,000 Wage Rule

The rule, in the words of the Code and the regulation

Section 603 of the SECURE 2.0 Act (Public Law 117-328) added paragraph (7) to section 414(v). The statute is short, and most of what readers argue about is in the regulation that fills it in.

Source: 26 U.S.C. 414(v) (Cornell Legal Information Institute); Pub. L. 117-328 section 603 (GovInfo); 26 CFR 1.414(v)-2 (eCFR); IRS Notice 2025-67; IRS Retirement topics page. All read and saved October 20, 2026.

Dates: why 2026 applies when the regulations start in 2027

The law says taxable years beginning after December 31, 2023 (section 603(c)). The IRS then said, in Notice 2023-62, that the first two such years were an “administrative transition period”: until taxable years beginning after December 31, 2025, catch-up contributions were treated as satisfying the Roth requirement “even if the contributions are not designated as Roth contributions”, and a plan with no Roth feature was treated as meeting the Roth-option rule. That is why 2024 and 2025 passed without a Roth catch-up for anyone, and why 2026 is the first live year.

Source: IRS Notice 2023-62; Federal Register, Catch-Up Contributions, September 16, 2025 (T.D. 10033); eCFR.

The preamble to the final regulations answers the obvious request, a longer transition: “The final regulations do not extend or modify the administrative transition period provided under Notice 2023-62.” It also gives an example of what good faith means before 2027: deciding the wage test by using Medicare wages (sections 3101(b) and 3111(b)) instead of Social Security wages. So in 2026 a payroll provider that looked at Box 5 is not automatically wrong, while from 2027 the rule is Box 3.

Who is caught: the Box 3 test, employer by employer

The regulation says a participant is subject when, for the preceding calendar year, the participant “had wages from the employer sponsoring the plan” above the threshold, with wages being wages as defined in section 3121(a) for the Social Security tax. The preamble puts it plainly: Treasury kept “the prior year FICA wages reported in Box 3 of Form W-2 for the participant”.

• Which employer. The participant's common law employer (26 CFR 1.414(v)-2(b)(4)(i)). A plan may choose to add together wages from a common-paymaster group or from members of a controlled group under sections 414(b), (c), (m) or (o); if it does not say so, each employer stands alone.
• Two employers, one plan. Where more than one unrelated employer sponsors the plan, wages are not added together, and catch-up from pay at one employer is Roth only if wages from that employer passed the threshold (paragraph (b)(5)).
• Spouse and other jobs. The test is the participant's own wages from the sponsoring employer. A spouse's wages, a second job at an unrelated company, rental income and K-1 income do not enter it (our reading of the text; the regulation never mentions them).
• Box 3 is capped. The preamble notes the Social Security wage base was $168,600 for 2024, well above the threshold, and says Treasury does not expect the cap to change who is caught.
• Changing jobs. Example 4 in the regulation shows a participant with $160,000 of FICA wages from one controlled-group employer and $35,000 from another, whose deferrals from the second employer's pay are not Roth-only because the plan did not aggregate. A new hire with no wages from the sponsor in the prior year has nothing to test (our reading).
• Partners and owners. Example 1: a participant with $156,000 of FICA wages from a firm in 2026, then a partner with only self-employment income in 2027, is still subject in 2027, because the test looks back at 2026 wages. Example 2: $60,000 of FICA wages plus a $155,000 partnership share is not subject, because only the FICA wages count. (The regulation's examples assume a $155,000 threshold for 2027; that is an assumption in the text, not a published figure.)

Decision tree: three questions, in this order

Source: 26 CFR 1.414(v)-2(a)(4), (b)(2); Notice 2023-62; Notice 2025-67; IRS Retirement topics page. Step 2 and 3 apply the regulation's wage test to the 2025 year.

Two clarifications on step 4. First, the age 60 to 63 amount is an option for the plan: the preamble says the Treasury Department and the IRS “expect that a plan's terms will be made clear” on whether a reference to the section 414(v) limit includes the higher limit, so read the plan document or ask. Second, the Roth-only requirement is written for “additional elective deferrals” under section 414(v)(1), and the higher 60 to 63 limit is the “adjusted dollar amount” in the same section, so we read it as covered too (our reading). The requirement bites only on deferrals above the regular limit: the IRS page says “Elective deferrals are not treated as catch-up contributions until they exceed the limit of $24,500 in 2026”.

What the rule costs: the deduction you no longer get

A pre-tax catch-up lowers 2026 taxable income by the amount contributed. A Roth catch-up does not, so for 2026 the extra federal income tax is the catch-up times the rate on the top dollars it sits on. Nothing else about the deferral changes. The table uses the 2026 rates in Revenue Procedure 2025-32; every figure is our arithmetic and ignores state tax and payroll tax.

Source: Revenue Procedure 2025-32, section 3.01 rate tables. Extra-tax columns are our arithmetic: catch-up amount times the bracket rate, assuming the whole amount falls in one bracket.

Because the participant has more than $150,000 of wages, most affected readers sit in the 24% or 32% bracket. Four cases show what the straddle does. Each assumes only wages, the 2026 standard deduction ($16,100 single; $32,200 joint, Rev. Proc. 2025-32 section 3.14) and a full $24,500 pre-tax deferral.

Source: our arithmetic on the Revenue Procedure 2025-32 tax tables; assumed taxpayers, federal income tax only, no other income or deductions.

Case C is the one to watch: the first $2,375 of the catch-up fills the 24% bracket up to $201,775 and the remaining $8,875 is taxed at 32%, which is $570 plus $2,840 (our arithmetic). A pre-tax deferral also lowers adjusted gross income, so a Roth catch-up leaves 2026 adjusted gross income higher by the same amount (our reading). Medicare's income-related premium is set from a return two years earlier, so for someone who turns 65 in 2028 the 2026 return is the one that counts; our IRMAA brackets page shows how that lookback works.

If your plan gets it wrong, or has no Roth option

A plan with no Roth feature. The regulation is direct: for a covered participant the maximum catch-up “is $0”, and the plan does not fail universal availability merely because of that (26 CFR 1.414(v)-2(b)(2)). A Roth feature is optional: Notice 2023-62 says a plan “may, but is not required to, include a qualified Roth contribution program”, so whether yours has one is a plan-document fact to check. Owners of solo plans are usually self-employed and outside the rule, but an owner paid a W-2 salary above $150,000 by a corporation that sponsors the plan is not (our reading); our solo 401(k) vs Roth IRA page covers what a solo plan can hold.

Deemed election. A plan may treat a covered participant's catch-up election as a Roth designation: it may provide that the participant “is deemed to have irrevocably designated” catch-up deferrals as Roth once deferrals pass the 401(a)(30) limit, as long as the participant has “an effective opportunity to make a new election” (paragraph (c)(3)(i)(B)).

Roth early in the year. Paragraph (b)(1) says deferrals that are catch-up because they exceed the section 401(a)(30) limit are Roth-only “to the extent the participant has not previously made elective deferrals that are designated Roth contributions during the taxable year equal to the applicable dollar catch-up limit”. Example 6 in the regulation shows $3,750 of early-year Roth deferrals reducing the amount later in need of correction (our reading of the example).

Correction. A pre-tax deferral that should have been Roth can be fixed by moving it to the Roth account and reporting it on Form W-2 if the participant's Form W-2 has not been filed or furnished, or by an in-plan Roth rollover reported on Form 1099-R (paragraph (c)(2)). A failure of $250 or less for a participant need not be corrected (paragraph (c)(4)(i)). For a statutory-limit failure the deadline is the last day of the taxable year after the year of the deferral, and an excess deferral not fixed by April 15 keeps its own tax treatment.

Where this fits for an investor with real estate on the side

The rule decides how the last $8,000 or $11,250 of a deferral is taxed. It does not decide what the account holds. A 401(k) catch-up usually lands in the plan's menu; what a 401(k) may hold is a separate question, and where the Department of Labor stands on it is on the DOL 401(k) alternative investments page. If a larger Roth balance is the goal, the other routes are the ones we cover in Roth conversion with illiquid IRA assets and the backdoor Roth pro-rata rule.

What to settle first

• If you are over $150,000 of 2025 Box 3 at a W-2 employer: your 2026 catch-up must be Roth, and the open questions are your top bracket on the extra income and whether your estimated tax or withholding covers it.
• If you are near the line: the test is a single number from Box 3 for 2025, so it is already fixed; nothing you do in 2026 changes whether you are covered, only the 2026 wages decide 2027.
• If your plan has no Roth feature and you are covered: the catch-up is not available to you this year, and the answer is a plan change or other accounts, not a form.
• If you are self-employed with a solo plan: you are outside the Roth-only rule on the facts above, but confirm that you have no W-2 from the entity that sponsors the plan.

What a reader can do with this

• Pull the number. Find your 2025 Form W-2 Box 3 from the employer that sponsors the plan. That figure, not Box 1 or total household income, is what the plan will test against $150,000.
• Read the plan. Ask the plan administrator three things in writing: does the plan have a Roth feature, does it allow the age 60 to 63 amount, and does it use a deemed Roth election for covered participants.
• Size the tax. Multiply the catch-up by your marginal rate from the tables above, then take it to your CPA with your expected 2026 income, because the result depends on where the extra $8,000 or $11,250 falls.
• Check the ordering. If you contribute Roth early in the year, the regulation counts it toward the catch-up requirement (paragraph (b)(1)); ask your plan how it applies that rule.
• Keep the record. Save the payroll summary showing which deferrals were Roth; a plan that finds a mistake has to correct it with a Form W-2 or Form 1099-R entry.

FAQ

Sources, read and saved on October 20, 2026: 26 U.S.C. 414(v) (Cornell Legal Information Institute); Pub. L. 117-328 section 603 (GovInfo); IRS Notice 2025-67; IRS Notice 2023-62; Federal Register, Catch-Up Contributions, T.D. 10033, 90 FR 44527 (September 16, 2025); 26 CFR 1.414(v)-2 (eCFR); Revenue Procedure 2025-32; IRS news release IR-2025-111 (November 13, 2025); IRS Retirement topics, Catch-up contributions. This is analysis of public documents, not investment, legal or tax advice.