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The limit for annual contributions to Roth and traditional individual retirement accounts (IRAs) in both the 2021 and 2022 tax years is $6,000, or $7,000 if you’re age 50 or older. However, there are restrictions that could affect how much you can contribute and what you can deduct on your tax return.
Key Takeaways
- The IRS limits the amount of money that you can contribute to your traditional and Roth IRAs.
- You can only contribute earned income to an IRA.
- Roth IRA contribution limits are reduced or eliminated at higher incomes.
- Traditional IRA contributions are deductible, but the amount you can deduct may be reduced or eliminated if you or your spouse is covered by a retirement plan at work.
- Lower-income taxpayers may be eligible for the saver’s credit if they contribute to an IRA.
IRA Contribution Limits
As noted above, the most you can contribute to your Roth and traditional IRAs in the year leading up to April 15, 2022 (for the 2021 tax year) and then again for the year 2022 leading up to April 15, 2023 (for the 2022 tax year) is:
- $6,000 if you’re younger than age 50
- $7,000 if you’re aged 50 or older
You Can Only Contribute Earned Income
You must have enough earned income to cover your contribution to an IRA. If your earned income for the year is less than the contribution limit, you can only contribute up to your earned income. For example, if you earned $3,000, you can contribute a maximum of $3,000.
There are two ways to get earned income, as defined by the Internal Revenue Service (IRS). You can work for someone else who pays you, or you can make money working for yourself. Earned income includes money from wages, salaries, tips, bonuses, commissions, and self-employment income.
The IRS also considers disability retirement benefits as earned income until you reach the age at which you could have received a pension or annuity if you didn’t have a disability.
Money that isn’t earned income
Some types of income don’t count as earned income, including:
Alimony, which represents court-ordered payments to a spouse in a divorce agreement, typically does not count as earned income that can be contributed to an IRA. However, taxable alimony is counted as earned income if the divorce agreement was signed on or before Dec. 31, 2018.
If you receive alimony, you might consult a tax professional and review your divorce agreement to determine whether your alimony income is considered taxable or not.
Spousal IRAs
If you don’t have earned income but your spouse does, you can open what’s called a spousal IRA. These accounts allow a person with earned income to contribute on behalf of the spouse who doesn’t work for pay.
You can structure a spousal IRA as a traditional or Roth IRA. Either way, the spouse with earned income can contribute to the IRAs of both spouses, assuming there is enough earned income to cover both contributions.
You must be married and file a joint tax return in order to be eligible for a spousal IRA.
Roth IRA Income Limits
You can contribute to a traditional IRA regardless of how much money you earn. But you’re not eligible to open or contribute to a Roth IRA if you make too much money.
Here’s a rundown of the 2021 and 2022 Roth IRA income and contribution limits, based on your filing status and modified adjusted gross income (MAGI):
| 2021 and 2022 Roth IRA Income Limits | |||
|---|---|---|---|
| Filing Status | 2021 Modified AGI | 2022 Modified AGI | Contribution Limit |
| Married filing jointly or qualifying widow(er) | Less than $198,000 | Less than $204,000 | $6,000 ($7,000 if you’re age 50 or older) |
| $198,000 to $208,000 | $204,000 to $214,000 | Reduced | |
| $208,000 or more | $214,000 or more | Not eligible | |
| Single, head of household, or married filing separately (and you didn’t live with your spouse at any time during the year) | Less than $125,000 | Less than $129,000 | $6,000 ($7,000 if you’re age 50 or older) |
| $125,000 to $140,000 | $129,000 to $144,000 | Reduced | |
| $140,000 or more | $144,000 or more | Not eligible | |
| Married filing separately (if you lived with your spouse at any time during the year) | Less than $10,000 | Less than $10,000 | Reduced |
| $10,000 or more | $10,000 or more | Not eligible | |
There are ways around the Roth IRA contribution limits for those who want to open an IRA. If you make a contribution to a nondeductible IRA, you can then convert it to a Roth IRA. The same applies to nondeductible contributions made to a 401(k) plan.
If you’re uncertain about your specific circumstances, you should check with a qualified tax professional.
If you make too much money, you may still be able to contribute to a Roth IRA using a strategy called a backdoor Roth IRA.
Traditional IRA Deduction Limits
Unlike Roth IRAs, there are no income limits for contributing to traditional IRAs. And you can deduct your contributions in full if you and your spouse don’t have a 401(k) or some other retirement plan at work.
If either one of you is covered by a plan at work, however, the deduction may be reduced or eliminated.
Here is the full rundown of IRA deduction limits for 2021 and 2022:
| 2021 and 2022 Traditional IRA Deduction Limits | |||
|---|---|---|---|
| If your filing status is… | And your 2021 modified AGI is… | And your 2022 modified AGI is… | Then you can take… |
| Single, head of household, qualifying widow(er), married filing jointly or separately and neither spouse is covered by a plan at work | Any amount | Any amount | A full deduction up to the amount of your contribution limit |
| Married filing jointly or qualifying widow(er) and you’re covered by a plan at work | $105,000 or less | $109,000 or less | A full deduction up to the amount of your contribution limit |
| More than $105,000 but less than $125,000 | More than $109,000 but less than $129,000 | A partial deduction | |
| $125,000 or more | $129,000 or more | No deduction | |
| Married filing jointly and your spouse is covered by a plan at work | $198,000 or less | $204,000 or less | A full deduction up to the amount of your contribution limit |
| More than $198,000 but less than $208,000 | More than $204,000 but less than $214,000 | A partial deduction | |
| $208,000 or more | $214,000 or more | No deduction | |
| Single or head of household and you’re covered by a plan at work | $66,000 or less | $68,000 or less | A full deduction up to the amount of your contribution limit |
| More than $66,000 but less than $76,000 | More than $68,000 but less than $78,000 | A partial deduction | |
| $76,000 or more | $78,000 or more | No deduction | |
| Married filing separately and either spouse is covered by a plan at work | Less than $10,000 | Less than $10,000 | A partial deduction |
| $10,000 or more | $10,000 or more | No deduction | |
Modified Adjusted Gross Income (MAGI)
The IRS uses your MAGI for assessing your IRA limits. This number can be close (or identical) to your adjusted gross income (AGI). It takes your AGI and adds back certain deductions, including:
To calculate your MAGI, find the AGI from your tax return—it’s on line 11 of the newly redesigned Form 1040. Then, use Appendix B, Worksheet 1 from IRS Publication 590-A, to modify your AGI for IRA purposes.
Excess IRA Contributions: If You Contribute Too Much
It’s good to max out your IRA contributions. But if you go overboard, the IRS considers it an ineligible or excess contribution. If you contribute too much or you contribute to a Roth when your income is too high, you’ll owe a 6% penalty on the excess contribution each year until you fix the mistake.
The good news is that there are several ways to fix your mistake:
- Withdraw the excess contribution (and any earnings on it) before the April tax deadline.
- If you’ve already filed your tax return, remove the excess contribution (and earnings) and file an amended tax return by the October deadline.
- Apply the excess to next year’s contribution. You’ll still pay the 6% penalty this year, but you’ll be set going forward.
- Withdraw the excess next year by Dec. 31. You’ll pay the penalty for two years and then move on.
Of course, it’s best to avoid excess contributions altogether. Be sure to pay attention to the IRS’ contribution limits for the year, keep track of your contributions, and watch your income. Just because you were eligible to contribute last year doesn’t mean you still are.
Ineligible IRA contributions trigger a 6% penalty on any amount you over-contribute.
The Saver’s Credit
People with low-to-moderate incomes may be eligible for the saver’s credit, a dollar-for-dollar reduction of the taxes you owe. This credit has existed since the early 2000s.
You could earn a credit of 10%, 20%, or 50% of your contributions, up to a dollar amount of $2,000 ($4,000 if married filing jointly) as long as you’re eligible.
The saver’s credit is available to individuals, heads of households, and joint filers who contribute to an IRA, 401(k), or any other qualified retirement account and whose AGI falls within certain parameters. You must also be over 18, not a full-time student, and not listed as a dependent on anyone else’s tax return.
The income thresholds are adjusted annually. Here are the saver’s credit rates for 2021 and 2022:
| 2021 Saver’s Credit | |||
|---|---|---|---|
| Credit | Married Filing Jointly | Head of Household | All Other Filers |
| 50% | AGI $39,500 or less | AGI $29,625 or less | AGI $19,750 or less |
| 20% | $39,501 to $43,000 | $29,626 to $32,250 | $19,751 to $21,500 |
| 10% | $43,001 to $66,000 | $32,251 to $49,500 | $21,501 to $33,000 |
| 0% | More than $66,000 | More than $49,500 | More than $33,000 |
| 2022 Saver’s Credit | |||
|---|---|---|---|
| Credit | Married Filing Jointly | Head of Household | All Other Filers |
| 50% | AGI $41,000 or less | AGI $30,750 or less | AGI $20,500 or less |
| 20% | $41,001 to $44,000 | $30,751 to $33,000 | $20,501 to $22,000 |
| 10% | $44,001 to $68,000 | $33,001 to $51,000 | $22,001 to $34,000 |
| 0% | More than $68,000 | More than $51,000 | More than $34,000 |
A married couple with an AGI of, say, $60,000 could save $400 on their 2021 tax bill by contributing $2,000 to each ($4,000 total) of their IRAs (the 10% level). If they managed to contribute $4,000 with an income below $39,500, their tax credit would be $2,000 (50% of their contributions).
Special Considerations
Contribution limits apply to other types of IRAs, such as Simplified Employee Pension (SEP) IRAs, Savings Incentive Match Plan for Employees (SIMPLE) IRAs, and solo 401(k) plans.
These three varieties of retirement savings plans are all designed for small businesses. They have similarities, but the solo 401(k) is the only one that can be created as a Roth account rather than a traditional account.
Keep in mind, though, that the contribution limits and deferral amounts for these accounts are not the same:
- For self-employed individuals and small business owners, the contribution limit for SEP IRAs and solo 401(k) plans cannot exceed 25% of compensation, up to $58,000 for 2021 and $61,000 for 2022.
- If you have a SIMPLE IRA, you can make salary deferrals (salary reduction contributions) up to $13,500 for 2021 and $14,000 for 2022. If you’re age 50 or older, you can add an extra $3,000.
The solo 401(k) combines the profit-sharing component of a SEP IRA with the salary deferral and catchup features of a 401(k) account. The plan you choose depends on your cash flow and whether you have employees. Elective deferrals for a one-participant 401(k) plan in 2021 are $19,500 and $26,000 for people under 50 and over 50, respectively. This amount changes to $20,500 and $27,000 for 2022. Your contributions can’t exceed $58,000 in 2021 and $61,000 in 2022 if you’re over the age of 50.
Can You Contribute to Both a Roth and Traditional IRA in the Same Year?
Yes, you may contribute to as many types of IRAs as you like. Opening multiple accounts, though, doesn’t mean you can contribute more overall—the contribution limit applies to all accounts.
What Is the Limit for Roth IRA Contributions in 2021 and 2022?
The maximum amount you can contribute to all traditional IRAs and Roth IRAs in the year to April 15, 2022 (2021) and the year to April 15, 2023 (2022) is $6,000, or $7,000 if you’re age 50 or older.
How Much Can I Contribute to My Roth 401(k) and Roth IRA in 2022?
If you have a Roth 401(k) plan and a Roth IRA, your total annual contribution across all accounts in 2022 cannot exceed $26,500, or $34,000 if you are 50 or older.
The Bottom Line
Any type of IRA is an excellent way to save for retirement. But to take full advantage of these accounts—and avoid any trouble or penalties—be sure to follow the rules for contribution, income, and deduction limits. The limits change periodically, so check back each year to make sure you comply.