The phase-out ranges for IRAs and other retirement accounts have been increased for 2022.
What’s new in 2022? A lot. For one, as of Friday, Nov. 5, 2021, the IRS posted new tables on IRS.gov that delineate 2022 IRA limits — some changed from 2021; some remained the same. Let’s review contributions and deductions.
Contributions To Traditional IRAs Unchanged
Everyone who has earned income no matter the age (even over 72, “RMD” age) can contribute to a traditional tax-deferred IRA — and even if they participate in a retirement plan at work, such as a 401(k). RMDs are required minimum distributions.
For 2022, the maximum IRA contribution is $6,000, the same as in 2021. If you are 50 or older, you can add another $1,000 as a catch-up contribution for a total maximum contribution in 2022 of $7,000, the same as 2021.
Traditional IRA Deductibility
Whether you can take a tax deduction for contributing to a traditional IRA depends on meeting certain requirements. The category under which you file your taxes is one determining factor, as are your income and whether you (or a spouse) participate in a retirement plan at work.
Before diving in, let’s define some terms.
Filing status can be single, head of household, married filing jointly, married filing separately and qualifying widow(er), which are all terms defined in the instructions for IRS Publication 1040.
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When we’re talking “income,” we’re dealing with “modified adjusted gross income” (MAGI). You can see an example of a MAGI worksheet for traditional IRAs at IRS.gov.
As to participation in a retirement plan at work, we’re talking about 401(k) or other defined contribution plans, an IRA-based plan or a defined benefit plan
2022 Changes: Deductions If Covered By A Retirement Plan At Work
If you are covered by a retirement plan at work, you may not be eligible for a deduction.
You can view the full 2022 phase-out chart for someone covered by a retirement plan at work at IRS.gov, but here are the highlights:
If you file your return as a single filer (or head of household):
- You can deduct your traditional IRA contribution in full if your MAGI is $68,000 or less in 2022 (up from $66,000 in 2021).
- You can deduct a reduced amount if your MAGI for 2022 is between $68,000 and $78,000 (up from the range of $66,000 to $76,000 for 2021).
- You can’t deduct any amount at all if your MAGI is $78,000 or more (up from $76,000 in 2021).
For married filing jointly:
- You can deduct your traditional IRA contribution in full if your MAGI is $109,000 or less in 2022 (up from $105,000 in 2021).
- You can deduct a reduced amount if your MAGI for 2022 is between $109,000 and $129,000 (up from the range of $105,000 to $125,000 for 2021).
- You can’t deduct any amount at all if your MAGI is $129,000 or more (up from $125,000 in 2021).
2022 Changes: Deductions If Not Covered By A Retirement Plan At Work
The full 2022 phase-out chart for someone not covered by a retirement plan at work is available at IRS.gov, but here is an important example:
- If the person contributing to an IRA is not covered by a workplace retirement plan, but is married to someone who is covered, the phase-out range for 2022 is increased to MAGI between $204,000 and $214,000 (up from the range of $198,000 to $208,000 in 2021).
SIMPLE IRA
The limit for individuals to contribute to their SIMPLE retirement accounts, which are often used by small companies with 100 or fewer employees, will be $14,000 for 2022, up from $13,500 in 2021. The catch-up for ages 50 and up is $3,000 for 2022 (no change from 2021), which means you can contribute up to $17,000 for 2022 if you are 50 or older.
Go here for more details on SIMPLE IRAs.
An Important Step
While these are the guidelines for 2022, before taking any action, be sure to consult with your tax adviser about your individual situation and the best way to proceed.
Questions?
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