Hello, Lexykayy, we are happy to host this opportunity to address your tax questions!
Question on Roth IRA:
The simple answer is: contributing to your Roth IRA will not impact your tax return at all, provided you did not contribute over the annual limit, and provided you are within the AGI limitations to contribute to a Roth IRA. A Roth is an after-tax retirement account, so amounts you contribute this year are not deductible on your tax return. Down the road, qualified distributions are tax-free, provided you have held a Roth IRA for five years and the distribution is:
- Made on or after the date you reaches age 59½, or
- Made due to death or disability, or
- For a qualified first-time home purchase ($10,000 lifetime limit).
Contributions to a Roth IRA are limited to the lesser of your compensation (or spouse’s compensation under a spousal Roth IRA), or $6,000 ($7,000 age 50 or older).
But, to be eligible to contribute to a Roth IRA, your Modified Adjusted Gross Income (MAGI) must be below certain thresholds. For 2022, if you are single or head of household, or married filing separately and you did not live with your spouse at any time during the year, you can contribute up to the limit indicated above if your MAGI is under $129,000. You can not contribute to a Roth IRA if your MAGI is over $144,000. For MAGI between these two amount, your contribution is limited.
For 2022 if your filing status is married filing jointly or qualifying widow(er), you can contribute the full amount if MAGI is under $204,000, cannot contribute if MAGI is over $214,000, and for a MAGI between these two amounts, the contribution is limited.
For 2022, if your filing status is married filing separately, and you lived with your spouse at any time during the year, you can contribute a reduced amount if your MAGI is under $10,000 - once your MAGI is over that amount, you are not eligible to contribute to a Roth IRA.
Questions on Political and Charitable Donations
Contributions are deductible only if made to a qualified organization. Qualified charitable organizations include nonprofit groups that are religious, charitable, educational, scientific, or literary in purpose, or that work to prevent cruelty to children or animals.
Political organizations and candidates are NOT considered a qualified charitable organization, so contributions to those entities/individuals are not deductible.
There are several ways to verify whether an organization is tax exempt and eligible to receive tax-deductible charitable contributions.
- Ask the organization whether it is a qualified organization. The organization should be able to provide verification of its charitable status.
- Go to https://apps.irs.gov/app/eos/ to access the IRS online tool (Tax Exempt Organization Search) that offers information on tax-exempt organizations.
- Call the IRS at 1-877-829-5500 (TTY/TDD 1-800-829-4059)
Charitable contributions are considered an Itemized Deduction, reported on Schedule A of your tax return. You can choose to either take the standard deduction, or to take itemized deductions on your return. So, to the extent that you make charitable contributions, but those and your other itemized deductions are not greater than your standard deduction, you will not get a tax benefit of these contributions (as you would rather take the higher standard deduction than the itemized deductions in this scenario). Only if your total itemized deductions, including your qualified charitable contributions, exceed your standard deduction will you see a tax benefit for deducting these amounts.
NOTE: for 2020 and 2021 tax years, there was a special rule that you can deduct a certain dollar amount of charitable contributions even if you took the standard deduction; but that rule is currently not extended to tax year 2022 or beyond.
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