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Tax Time: Close Out 2022 With an IRA Contribution

Take advantage of the extra time to make contributions for the prior year.

Woman preparing taxes

The countdown is on to get your taxes in order—and make your final retirement contributions.

Why Contribute to an IRA Now?

In addition to adding to your savings for the future, IRAs provide tax benefits. To take advantage, you must follow certain rules and list contributions on your tax return.

The IRS sets contribution limits for each tax year ($6,000 for 2022 and $6,500 for 2023, with an extra $1,000 for those age 50 and over). And for Traditional IRAs, some or all of those contributions may be tax deductible and can lower your tax bill.  

Your 2022 contributions can be made up until April 18, 2023. But unlike extensions for regular tax filings (October 16, 2023), the IRS doesn’t allow extra time for IRA contributions. Once the deadline has passed, you've missed the opportunity for that tax year.

Check or your state's tax website for updates on current extensions or in case of other potential events.

What Benefits Do IRAs Offer?

You could invest the same amount into a taxable account, but it would not have the same tax benefits an IRA offers.

In fact, because investors may have missed out on those advantages in the past, the IRS created “catch-up” contributions for those age 50 or older. This lets them contribute an additional $1,000 each year.

Comparing the features and tax benefits of Traditional and Roth IRAs can help you determine which one might be the best for you.

If you expect to remain in the same tax bracket when you make contributions and withdraw the full balance (or if you have a long time frame), a Roth IRA generally may be the best option. If you'll be in a lower tax bracket when you begin withdrawals (or have a shorter time frame), a Traditional IRA may be a better choice.

Roth vs. Traditional IRAs: A Comparison

Income Requirements

Roth IRAs

You must have earned income below annual limits to be eligible for contributions (or partially eligible if your income is within a certain range).

Traditional IRAs

You must have earned income to make contributions.

Taxes on Contributions and Earnings

Roth IRAs

Contributions are not tax deductible but can be withdrawn tax-free and penalty-free at any time.¹

Earnings can be tax-free if the account is at least five years old and you are at least age 59½.

Traditional IRAs

Some or all contributions may be tax deductible.²

Income tax on earnings is deferred until you withdraw them.

Distribution Considerations

Roth IRAs

At age 59½, you can make penalty-free, qualified withdrawals.

You are not required to take money out at any age and can contribute as long as you have earned income.

Traditional IRAs

At age 59½, you can make penalty-free withdrawals.

The year you turn 73, you must take annual required minimum distributions (RMDs) to avoid a 50% penalty on the required withdrawal. (If you turned 72 in 2022 or earlier, you’ll need to continue taking RMDs.)

Make Too Much for a Roth IRA? Consider Converting

If your income exceeds the limits and you don’t qualify, you can still consider a Roth IRA conversion. You can convert all or part of your Traditional IRA to a Roth IRA without being subject to the 10% early withdrawal penalty.⁴ In the year you convert, you will owe taxes on your previous contributions and earnings, which were not taxed while they were in the Traditional IRA.

Other Tax Tips and Reminders

Remote Work and Tax Filings

Remote work may impact your state and local tax filings. You may want to consult with a tax advisor about whether your work location might affect how you file your tax return(s).

Finding Tax Forms

If your American Century accounts generated a Form 1099, we mailed them to you in January. You can easily download copies of your forms by logging in to your account.

Other Tax Tips

Visit our Tax Center to find additional information, such as fund-specific exemptions, help for understanding cost basis as well as other tools, resources and tips.

Ready to Invest?

If you have an existing IRA, make your yearly contribution now.


State and local taxes may apply.


Some or all contributions may be tax deductible, depending on your modified adjusted gross income, tax-filing status and if you or your spouse participated in a workplace plan.


IRA investment earnings are not taxed. Depending on the type of IRA and certain other factors, these earnings, as well as the original contributions, may be taxed at your ordinary income tax rate upon withdrawal. A 10% penalty may be imposed for early withdrawal before age 59½.


If you choose to withhold taxes as part of a Roth conversion, the amount withheld is generally subject to the 10% early withdrawal penalty. Please consult your tax advisor as needed.

You could lose money by investing in a mutual fund, even if through your employer's plan or an IRA. An investment in a mutual fund is not insured or guaranteed by the Federal Deposit Insurance Corporation or any other government agency.

Investment return and principal value of security investments will fluctuate. The value at the time of redemption may be more or less than the original cost. Past performance is no guarantee of future results.

This material has been prepared for educational purposes only. It is not intended to provide, and should not be relied upon for, investment, accounting, legal or tax advice.

Please consult your tax advisor for more detailed information regarding the Roth IRA or for advice regarding your individual situation.

Taxes are deferred until withdrawal if the requirements are met. A 10% penalty may be imposed for withdrawal prior to reaching age 59½.

IRS Circular 230 Disclosure: American Century Companies, Inc. and its affiliates do not provide tax advice. Accordingly, any discussion of U.S. tax matters contained herein (including any attachments) is not intended or written to be used, and cannot be used, in connection with the promotion, marketing or recommendation by anyone unaffiliated with American Century Companies, Inc. of any of the matters addressed herein or for the purpose of avoiding U.S. tax-related penalties.

This information is for educational purposes only and is not intended as tax advice. Please consult your tax advisor for more detailed information or for advice regarding your individual situation.