5 Things to Know When Making a 2022 Roth IRA Contribution
Tax season is upon us. At tax time, you might be considering contributing to a retirement account. If you follow the rules, you may be interested in the Roth IRA, which can promise tax-free withdrawals in retirement. If you are making a 2022 Roth IRA contribution, here are five (5) things you need to know:
1. Maximum Contributions: If you were under 50 in 2022, your maximum contribution to a Roth IRA for 2022 is $6,000. For those who reached age 50 in 2022, the maximum increased to $7,000. The annual limit is aggregated for traditional and Roth IRAs. For example, if you are under age 50, you could contribute $4,000 to your Roth IRA and $2,000 to your traditional IRA. You may not contribute $6,000 to your traditional IRA and another $6,000 to your Roth IRA for 2022.
2. Deadline for Contributing: The deadline for contributing to a Roth IRA for 2022 is April 18, 2023. If you have an extension to file your taxes, that does not give you more time. Sooner is better than later. Don’t wait until the last minute; you never know what may happen.
3. Taxable Compensation Requirement: You or your spouse must have taxable compensation or earned income to make a Roth IRA contribution. Passive income, such as investment income, will not work. Social Security income will not work either.
4. Reporting the Contribution: Be sure to let the IRA custodian know the year to which you contribute. Since we are in 2023, designate your contribution as a 2022 prior year contribution to avoid confusion. Interesting fact - Who don’t you have to tell about your Roth IRA contribution? That would be the IRS. Reporting a Roth IRA contribution on your 2022 federal tax return is unnecessary. It is good practice, however, for you or your tax preparer to keep track of your Roth IRA contributions.
5. Eligibility: You are never too old to contribute to a Roth IRA. Do you already contribute to a retirement plan at work? That is not a problem either. Participation in your company plan does not affect your eligibility to make a Roth IRA contribution.
Your income must be under certain limits to make a Roth IRA contribution. Consider a back-door Roth IRA if your income is too high; you contribute to a traditional IRA and convert. Sound intriguing? Contact the Team at DFG to see if this is a good strategy. Suppose you have pre-tax funds in any IRA. In that case, the pro-rata rule will apply to your Roth conversion, making part of your conversion taxable.
~By Sarah Brenner, JD, Director of Retirement Education
Copyright © 2023, Ed Slott and Company, LLC
Reprinted from The Slott Report, February 13, 2023, with permission.
https://www.irahelp.com/slottreport/5-things-know-when-making-2022-roth-ira-contribution
Ed Slott and Company, LLC takes no responsibility for the current accuracy of this
article.
Reprinted from The Slott Report, February 13, 2023, with permission.
https://www.irahelp.com/slottreport/5-things-know-when-making-2022-roth-ira-contribution
Ed Slott and Company, LLC takes no responsibility for the current accuracy of this
article.
To better serve you, I have provided a link below called the 2022/2023 TAX SEASON GUIDE; click on the link to learn more. Dixon Financial Group cannot give tax advice, but we are here to guide you through the process regarding your investments and provide suggestions now to help reduce your tax liability in the future. Please call the DFG Team so we can answer your questions, and let us be a part of your retirement journey.
David S. Dixon, CFP®
Jacob Bierstedt, CFP®, ChFC®