What’s new in 2022? A lot. On the one hand, since Friday, November 5, 2021, the IRS has published new tables on IRS.gov that delineate the boundaries of the IRA 2022 – some have changed as of 2021; some have remained the same. Let’s review the contributions and deductions.

Contributions to traditional IRAs unchanged

Anyone with income, regardless of age (even over 72, “RMD” age) can contribute to a traditional tax-deferred IRA – and even if they participate in a workplace retirement plan, such as a 401 (k). RMDs are minimum required distributions.

For 2022, the maximum IRI contribution is $ 6,000, the same as in 2021. If you are 50 years of age or older, you can add an additional $ 1,000 as a catch-up contribution for a total maximum contribution in 2022 by $ 7,000, the same as in 2021.

Traditional IRA deductibility

Whether you can claim a tax deduction for contributing to a traditional IRA depends on meeting certain requirements. The category in which you file your taxes is a determining factor, as is your income and whether you (or a spouse) participate in a workplace pension plan.

Before we dive in, let’s define a few terms.

Filing status can be single, head of household, married filing spouse, married filing separate, and eligible widower (s), all of which are defined terms in the instructions for IRS publication 1040.

When we talk about “income” we are talking about “modified adjusted gross income” (MAGI). You can see a sample MAGI spreadsheet for Traditional IRAs at IRS.gov.

As for participation in a workplace pension plan, it is referred to as 401 (k) or other defined contribution plans, an IRA-based plan or a defined benefit plan.

Changes 2022: Deductions If covered By a workplace pension plan

If you are covered by a workplace pension plan, you may not be entitled to a deduction.

You can see the full 2022 phase-out table for someone covered by an occupational pension plan at IRS.gov, but here are the highlights:

If you file your declaration as the sole declarant (or head of household):

• You can fully deduct your traditional IRA contribution 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 (compared to the range of $ 66,000 to $ 76,000 for 2021).
• You cannot deduct any amount if your MAGI is $ 78,000 or more (compared to $ 76,000 in 2021).

For the joint filing:

• You can fully deduct your traditional IRA contribution 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 (compared to the range of $ 105,000 to $ 125,000 for 2021).
• You cannot deduct any amount if your MAGI is $ 129,000 or more (compared to $ 125,000 in 2021).

Changes 2022: Deductions If not covered By a workplace pension plan

The full picture of the 2022 phase-out for someone not covered by a workplace pension plan is available on IRS.gov, but here is an important example:

• If the person contributing to an IRA is not covered by a workplace pension plan, but is married to a covered person, the phase-out range for 2022 is increased to MAGI between $ 204,000 and $ 214,000 (from a 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 businesses with 100 or fewer employees, will be $ 14,000 for 2022, up from $ 13,500 in 2021. Catching up for 50-year-olds and under plus 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 SINGLE IRAs.

An important step

While these are the guidelines for 2022, before taking any action, be sure to consult your tax advisor about your individual situation and how best to proceed.

Questions?

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