There are a few different types of IRAs, including the traditional IRA. Learn how much you can contribute to a traditional IRA and how this affects your tax deductions.
IRA Contribution Limits
You can contribute $6,000 to your IRA in the 2022 tax year. You’re allowed to make an additional “catchup contribution” of $1,000 for an annual total of $7,000 if you’re age 50 or older. These limits increase to $6,500 and $7,500 in 2023. Contributions to a traditional IRA are tax deferred. This means you won’t pay income tax on the money you invest until you withdraw it and its earnings. You can begin withdrawing from retirement accounts without penalty once you reach age 59½. You must have earned income throughout the year to qualify to make IRA contributions. These sources of income include:
Wages reported on a W-2 Self-employment income from a business or farm Commissions Bonuses Alimony Nontaxable combat pay
People with low levels of taxable income may not be able to contribute the full $6,000 or $6,500 limit. your total taxable income becomes your IRA contribution limit if it falls below these limits.
Deadlines for Making Contributions
You can contribute funds to your traditional IRA at any time from the start of the calendar year up until the first deadline for your tax return. Any personal extensions you might take to file your tax return won’t affect your window of time for contributing to your IRA. You can make 2022 contributions up until April 18, 2023 because April 15 (the usual tax deadline) falls on a Saturday in 2023 and April 17 is a holiday.
IRA Deduction Limits
Depending on your annual income and workplace retirement plan options (such as a 401(k) plan), your IRA deduction limits may be lower than your contribution limits. Contributions to a traditional IRA can be fully deductible, partially deductible, or entirely nondeductible. If you aren’t covered by a retirement plan at work (and you are not married to someone who is covered by a retirement plan), your contributions are fully deductible up to your contribution limit. If you are covered by a retirement plan, how much you can deduct is based on your modified adjusted gross income (MAGI) and filing status. These income and deduction limits are frequently adjusted to account for inflation and cost of living changes. In 2022 and 2023 these limits are: Your spouse might be covered by a retirement plan at work even if you’re not. In this case, your deduction is phased out if your MAGI is more than $204,000 but less than $214,000 for tax year 2022 if you live together or file a joint tax return. These limits increase to $218,000 but less than $228,000 in 2023.
