It’s never too early to start saving for retirement. Investing in an individual retirement account (IRA) is a great way to save for the future. However, there are limits to how much you can contribute to these accounts each year.
Keep reading to learn more about how IRA contribution limits work.
2022 Roth IRA Contribution Limits
If you’re under 50 years old, the annual IRA contribution limit is $6,000 in 2022 – and up to $7,000 if you’re 50 or older.[1]
These limits apply to your combined traditional and Roth IRA contributions. So if you have both a Roth IRA and a traditional IRA, your total contributions can’t exceed the $6,000 threshold.
Your earned income also plays a factor in how much you’re able to contribute each year. If your modified adjusted gross income (MAGI) passes a certain limit, the amount you can contribute may be reduced or disallowed altogether. We’ll discuss this in more detail later.
This rule only applies to Roth IRA contributions, as there are no income limits for traditional IRAs.
Let’s take a look at an overview of the contribution limits for 2022 based on different income levels.
| Filing Status | 2022 Income (MAGI) | Maximum Annual Contribution |
| Single, head of household or qualifying widow(er) | $129,000 or less | $6,000 ($7,000 if 50 or older) |
| $129,000 up to $144,000 | Reduced amount | |
| $144,000 or more | No contribution allowed | |
| Married filing jointly or qualifying widow(er) | $204,000 or less | $6,000 ($7,000 if 50 or older) |
| $204,000 up to $214,000 | Reduced amount | |
| $214,000 or more | No contribution allowed | |
| Married filing separately (if you lived with spouse at any time during year) | Less than $10,000 | Reduced amount |
| $10,000 or more | No contribution allowed |
MAGI is an individual’s adjusted gross income (AGI) after adjustments are made for certain deductions, exemptions and penalties.
2022 Traditional Deduction Limits
Traditional IRA contributions are tax-deferred, meaning taxpayers delay paying taxes until some point in the future. Roth IRA contributions are made with after-tax income, but withdrawals from the account are tax-free once you retire.
As previously mentioned, there are no income caps with traditional IRAs. You can deduct your contributions on a traditional IRA when you file taxes, unlike Roth IRAs.
However, your ability to deduct contributions from your taxes may be limited based on you and your spouse’s retirement plan.
If you or your spouse has a 401(k) or another retirement plan with an employer, and have already made contributions in the current year, then the amount you’re able to deduct on your taxes will likely be reduced. If you and your spouse don’t have a separate work retirement plan, then you can deduct your contributions in full.
Now, let’s review the tax deduction limits for traditional IRAs in 2022.
| Filing Status | 2022 MAGI | Deduction Limit |
| Single or head of household (and covered by retirement plan at work) | $68,000 or less | Full deduction |
| $68,000 up to $78,000 | Partial deduction | |
| $78,000 or more | No deduction | |
| Married filing jointly (and covered by retirement plan at work) | $109,000 or less | Full deduction |
| $109,000 up to $129,000 | Partial deduction | |
| $129,000 or more | No deduction | |
| Married filing jointly (spouse covered by retirement plan at work) | $204,000 or less | Full deduction |
| $204,000 up to $214,000 | Partial deduction | |
| $214,000 or more | No deduction | |
| Married filing separately (you or spouse covered by retirement plan at work) | $10,000 or less | Partial deduction |
| $10,000 or more | No deduction |
Modified Adjusted Gross Income (MAGI) vs. Adjusted Gross Income (AGI)
In many cases, the MAGI and AGI will be very similar or exactly the same.
Your AGI is all of your income minus certain adjustments. Some common adjustments include:
- Retirement plan contributions
- Student loan interest
- Alimony payments
- Tuition fees
- Special business expenses
The AGI helps the IRS determine your tax bracket and which tax credits or deductions you may qualify to claim on your tax return.
Your MAGI is essentially your AGI with some of those adjustments added back in.
The IRS uses your MAGI to determine your IRA contribution limits.
Exceptions to IRA Contributions
For every rule, there’s an exception. And when it comes to IRA contributions, there are several of them. Here are two of the biggest caveats you should know:
- Non-working spouses can have a spousal IRA: If half of the married couple is working and the other is not (and you’re both under 50 years old), then the non-working spouse can open up an IRA in their own name and make contributions through a spousal IRA. The contribution limit then becomes $12,000 for both spouses ($6,000 each).
- Rollover contributions don’t count towards the annual contribution limit: If you change jobs and decide to rollover your 401(k) from your previous employer into your new IRA, you’ll still have your full allotment of contributions before you reach the limit for the year.
What Happens if You Contribute Too Much to an IRA?
Saving for retirement is a good thing, but investing beyond the limit could lead to trouble with the IRS. If you go past the annual contribution limits or contribute to a Roth when your income is too high, the IRS charges a 6% tax each year until the issue is resolved.
If you notice you’ve gone beyond the limit prior to filing your tax return, you can fix the mistake and withdraw the excess contribution to avoid the fee. However, you may have to pay income taxes on the earnings and an early withdrawal penalty.
If you catch the problem after your tax return has already been filed, you can attempt to file an amended return before the deadline or fix it by reducing next year’s contributions by the excess amount.
If you find yourself in this predicament, reach out to a tax professional or financial advisor to decide which route is the best option.
Save for Your Future… but Not Too Much
As long as you stay within the confines of the limits and rules set by the IRS, you shouldn’t have any issues contributing to your IRA. Pat yourself on the back for planning for your future!