It is too late to make contributions to your 2022 TSP account, but that is not the case for IRAs.
The maximum contributions for 2022 that you can make for Traditional IRAs and Roth IRAs can’t be more than $6,000 ($7,000 if you’re age 50 or older). You have until April 18, 2023, to make contributions to an IRA for 2022.
You can still contribute to a Traditional and /or Roth IRA if you participate in an employer-sponsored retirement plan such as the Thrift Saving Plan (TSP). Contributing to an IRA for 2022 is an opportunity to not only earmark more dollars for your retirement but also possibly increase the size of your tax refund.
The 2022 rules for the Traditional IRA are provided in the table below:
|If Your Filing Status Is…||And Your Modified AGI Is…||Then You Can Take…|
head of household
|$68,000 or less||a full deduction up to the amount of your contribution limit.|
head of household
|more than $68,000 but less than $78,000||a partial deduction.|
head of household
|$78,000 or more||no deduction.|
|married filing jointly or qualifying widow(er)||$109,000 or less||a full deduction up to the amount of your contribution limit.|
|married filing jointly or qualifying widow(er)||more than $109,000 but less than $129,000||a partial deduction.|
|married filing jointly or qualifying widow(er)||$129,000 or more||no deduction.|
|married filing separately||less than $10,000||a partial deduction.|
|married filing separately||$10,000 or more||no deduction.|
Note: If you file separately and did not live with your spouse at any time during the year, your IRA deduction is determined under the “single” filing status.
The table, 2022 IRA Contribution, and Deduction Limits Effect of Modified AGI on Deductible Contributions If You ARE Covered by a Retirement Plan at Work, is also available on the IRS website.
How can you find your modified Adjusted Gross Income (MAGI)?
One way to find your Modified Adjusted Gross Income (MAGI) is to provide your tax preparer with all your information for the 2022 tax year AND inform her or him you would like to explore adding a tax-deductible IRA for that year. Then you will be provided a projection on if a tax-deductible IRA is possible for your circumstances. Then determine if you would like to make the IRA contribution.
If you decide to make the IRA contribution, tell the preparer and your taxes will be recalculated to reflect the addition of the IRA contribution and make the contribution before your April 18, 2023.
Another way to estimate your MAGI is to use tax software. Such software will provide you with your Adjusted Gross Income on IRS Form 1040 Line 37, Form 1040A Line 21, or Form Line 1040EZ Line 4. Then you will have to add back any of the following items to get the MAGI:
- Student loan interest
- Self-employment tax
- Passive losses or passive income
- Taxable social security payments
- U.S. savings bond income
- Income from
- Adoption expenses
- Rental losses
- Losses from a publicly traded partnership
Your MAGI should be the same as your AGI when you don’t have any of the above items. I strongly advise using a tax professional to assure the software information is correctly calculated.
What about a Roth IRA?
The IRS rules for Roth IRA contributions are different from the Traditional IRA. The table from the IRS below shows how a Roth IRA is affected by the amount of your MAGI for 2022 Roth IRA contributions.
|If your filing status is…||And your modified AGI is…||Then you can contribute…|
|married filing jointly or qualifying widow(er)||< $204,000||up to the limit|
|married filing jointly or qualifying widow(er)||> $204,000 but < $214,000||a reduced amount|
|married filing jointly or qualifying widow(er)||> $214,000||zero|
|married filing separately and you lived with your spouse at any time during the year||< $10,000||a reduced amount|
|married filing separately and you lived with your spouse at any time during the year||> $10,000||zero|
|single, head of household, or married filing separately and you did not live with your spouse at any time during the year||< $129,000||up to the limit|
|single, head of household, or married filing separately and you did not live with your spouse at any time during the year||> $129,000 but < $144,000||a reduced amount|
|single, head of household, or married filing separately and you did not live with your spouse at any time during the year||> $144,000||zero|
Note: Go to this IRS link for guidance and information on the reduced amounts displayed in the table.
What about a Non-Deductible IRA?
In addition to the Traditional and Roth IRA options, there is also a Non-Deductible IRA. The IRS has a 12-page document on Non-Deductible IRAs, but you may find it easier reading at Investopedia because it includes easy-to-understand Frequently Asked Questions.
The time, work, and record-keeping for the Non-Deductible IRA in complying with the IRS Form 8606 is significant. To me, it is a bridge too far for the average person and you probably will be grateful for a professional tax preparer if you desire to consider the Non-Deductible IRA.
This article was written for informational purposes only. Consult your professional advisor before acting on the information set forth herein.