The information below was taken from the Fidelity website. A link to the source is provided at the bottom of the article.
Main points
- In 2022, those under 50 can contribute $6,000 to their IRAs, while those over 50 can contribute $7,000.
- In 2023, those under 50 can contribute $6,500 to their IRAs, while those over 50 can contribute $7,500.
IRAs help save and invest for retirement. However, they have annual limits on how much you can contribute and deduct from your taxes, which may depend on your income. The essentials are as follows:
| IRA and Roth IRA contribution limits | ||
| Year | Under age 50 | Age 50 and older |
| 2022 | $6,000 | $7,000 |
| 2023 | $6,500 | $7,500 |
Income restrictions for traditional IRAs in 2022 and 2023
Traditional IRAs have no income limit, unlike Roth IRAs. Your and your spouse’s income determine whether you can deduct traditional IRA contributions from your taxable income.
You and your spouse may deduct the full amount of your IRA contributions, up to the contribution limit, if neither of you has access to a workplace retirement savings plan.
If you or your spouse have a workplace plan, your deduction limit may be lower. After adjustments, you earn that much annually. If you’re unsure how much of your IRA contributions you can deduct, consult a tax professional.
Even if you cannot deduct your traditional IRA contributions, your money can compound and grow tax-deferred until you withdraw it. You won’t pay income taxes on contributions you didn’t deduct.
The tables below can help you determine how much of your traditional IRA contribution you can deduct based on your income, tax filing status, and access to a workplace retirement plan.
Traditional IRA deduction limits
| 2022 IRA deduction limit — You are covered by a retirement plan at work | ||
| Filing status | Modified adjusted gross income (MAGI) | Deduction limit |
| Single individuals | ≤ $68,000 | Full deduction up to the amount of your contribution limit |
| > $68,000 but < $78,000 | Partial deduction (calculate) | |
| ≥ $78,000 | No deduction | |
| Married (filing joint returns) | ≤ $109,000 | Full deduction up to the amount of your contribution limit |
| > $109,000 but < $129,000 | Partial deduction (calculate) | |
| ≥ $129,000 | No deduction | |
| Married (filing separately)* | Not eligible | Full deduction up to the amount of your contribution limit |
| < $10,000 | Partial deduction | |
| ≥ $10,000 | No deduction | |
| 2022 IRA deduction limits — You are NOT covered by a retirement plan at work | ||
| Filing status | Modified adjusted gross income (MAGI) | Deduction limit |
| Single, head of household, or qualifying widow(er) | Any amount | A full deduction up to the amount of your contribution limit |
| Married filing jointly with a spouse who is not covered by a plan at work | Any amount | A full deduction up to the amount of your contribution limit |
| Married filing jointly with a spouse who is covered by a plan at work | $204,000 or less | Full deduction up to the amount of your contribution limit |
| > $204,000 but < $214,000 | A partial deduction (calculate) | |
| ≥ $214,000 or more | No deduction | |
| Married filing separately with a spouse who is covered by a plan at work | < $10,000 | Partial deduction |
| ≥ $10,000 | No deduction | |
| 2023 IRA deduction limit — You are covered by a retirement plan at work | ||
| Filing status | Modified adjusted gross income (MAGI) | Deduction limit |
| Single individuals | ≤ $73,000 | Full deduction up to the amount of your contribution limit |
| > $73,000 but < $83,000 | Partial deduction (calculate) | |
| ≥ $83,000 | No deduction | |
| Married (filing joint returns) | ≤ $116,000 | Full deduction up to the amount of your contribution limit |
| > $116,000 but < $136,000 | Partial deduction (calculate) | |
| ≥ $136,000 | No deduction | |
| Married (filing separately)* | Not eligible | Full deduction up to the amount of your contribution limit |
| < $10,000 | Partial deduction | |
| ≥ $10,000 | No deduction | |
| ≥ $10,000 | No deduction | |
| 2023 IRA deduction limits — You are NOT covered by a retirement plan at work | ||
| Filing Status | Modified adjusted gross income (MAGI) | Deduction limit |
| Single, head of household, or qualifying widow(er) | Any amount | A full deduction up to the amount of your contribution limit |
| Married filing jointly with a spouse who is not covered by a plan at work | Any amount | A full deduction up to the amount of your contribution limit |
| Married filing jointly with a spouse who is covered by a plan at work | $218,000 or less | Full deduction up to the amount of your contribution limit |
| > $218,000 but < $228,000 | A partial deduction (calculate) | |
| ≥ $228,000 or more | No deduction | |
| Married filing separately with a spouse who is covered by a plan at work | < $10,000 | Partial deduction |
| ≥ $10,000 | No deduction | |
If you put too much money into your IRA, what will happen?
You can withdraw excess contributions and any investment gains made from those contributions until your taxes are due. You’ll need to declare any profits you made from investing when filing your taxes.
It’s possible to incur a 6% annual tax penalty on the excess amount until you withdraw the funds from the account if you don’t notice the overpayment in time.
Is there a recommended yearly IRA contribution amount?
Calculating how much you should put away in your IRA can be tricky. According to Fidelity, you should aim to save 15% of your annual pre-tax income (including any employer contributions) for retirement. This covers any savings in 401(k)s or 403(b)s as well as any other retirement accounts or savings plans.
A financial advisor can help you determine the best course of action based on your specific situation and objectives.
Conclusion
It is important to know the Annual IRA contribution limits, as they often change annually. You can contribute the maximum to grow your retirement savings and diversify your future tax exposure. However, any excess contribution will be taxed at 6% for the duration of that excess $ amount.
That said, it is not required to max out the annual contribution if that will result in personal monthly cash flow problems. Any contribution helps. Conversely, limits are there in order to prevent high-income earners from abusing the system.
James A. Jones.
Senior Vice President, Investor Relations
Sources
“IRA deduction limits,” Internal Revenue Service, October 26, 2022. https://www.fidelity.com/viewpoints/retirement/traditional-or-roth-ira
Please note CalTier does not provide financial advice. Please consult your financial expert before making financial decisions.
