Year-End Contributions for Taxes
It is that time of the year again when we must do the one thing that most people dislike; TAXES!! It is also the time of year when folks can make last minute contributions to their retirement accounts for the 2022 tax year to claim a deduction. Here are some key discussion points regarding the typical IRA contributions:
- Contributions for 2022 can be made to a Traditional or Roth IRA until the filing due date, April 18th, 2023, but must be designated for 2022.
- While contributions for the Roth IRA are not tax-deductible, qualified distributions are tax-free.
- Eligible taxpayers can contribute up to $6,500 to an IRA for 2022. For those 50 years of age or older at the end of 2022, the limit has increased to $7,500. Additionally for those 50 or older, there is a $1,000 catch up allowed over the $6,500 for a total of $7,500.
- The IRS has also stated there is no longer a maximum age for making an IRA contribution. So even if you are, retired and over the age of 72 you can contribute to an IRA or a Roth IRA if you have other earned income besides social security.
- To find out more about the taxable deductions or what qualifies for other income, it’s important to discuss with a tax professional.
Contributing to an IRA one way to create a tax deduction as well as save for the future. However, with the market and economy so volatile, some have inquired as to other options for contributions, including annuities. Currently, interest rates are higher than we have seen in many years, but we all are conscious of how these interest rates may return to the previous low levels at any time. ProducersXL offers carriers that allow for contributions as well as to additions every year to the account.
Reminder, all qualified accounts (IRA, 401k, 403B, retirement plans) have a Required
Minimum Distribution (RMD). In late 2022, Congress passed legislation that raised the age you must start taking RMDs from 72 to 73 years old starting in 2023. This means, if you turned 72 in 2022, you are required to take your first RMD by April 1, 2023 and will need to take another one by the end of 2023. If you turn 72 in 2023, you won’t have to take an RMD until 2024 (when you turn 73), which will be due by April 1, 2025. If you don’t take the RMD, you’ll have to pay a penalty of 50% of the RMD amount.
Please call or email Scott Sandquist for more information on ways to contribute to an IRA or Roth IRA as well as annuity options.