
Tax Topic
IRA Contributions
There are a few types of IRAs (Individual Retirement Accounts), but the most common are the Traditional IRA and the Roth IRA. Generally, once you contribute to an IRA, you cannot withdraw the funds until you are 59½ (and at least five years after opening a Roth IRA) without a 10% penalty (there are a very few exceptions). You may contribute up to $6,000 ($7,000 if at least 50 years old in 2022) in total to any combination IRAs each year assuming you (or your spouse) have at least that much in "earned income" (wages or self-employed earnings). The due date for 2022 IRA contributions is April 18, 2023. Both Traditional and Roth IRAs can be set up at most financial institutions - banks, investment houses, insurance companies. They are generally "self-directed," meaning once your funds are in the account, you decide how they will be invested. Anything from CDs to stocks to bonds. I generally recommend you do not invest in real estate or REITs within your IRA. A Roth IRA is about the best deal going from an income tax perspective. Roth IRA contributions are not deductible but based on current law all earnings in a Roth IRA account will be tax free. There are income limits on contributing to a Roth IRA, however. Contributions to a Roth IRA are not deductible and are limited based on your Modified AGI as follows for 2022 (phase out range):- Single or Head of Household, $129,000 - $144,000
- Married filing joint, $204,000 - $214,000
- Married filing separately, $0 - $10,000
- Single, $68,000 - $78,000
- Married Filing Joint, varies depending on coverage by retirement plan for each spouse
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