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a taxpayer can contribute to a Roth IRA AICPA RESOURCES
Neither the is completely phased out when MAGI Article
reaches $214,000 for a married-filing-
traditional nor Roth jointly filer, $144,000 for a single or Long, “Medicare’s Tricky Rules on
IRA requires health head-of-household filer, or $10,000 for a HSAs After Age 65,” 232-1 Journal of
Accountancy 39 (July 2021)
married-filing-separately filer.7
insurance coverage Withdrawals from a traditional Podcast episodes
of any kind. IRA are taxable. Furthermore, a 10%
additional tax on early distributions ap- “What Is a ‘Super HSA’ and How
Does It Work,” with Kelley Long,
plies to amounts withdrawn before the
CPA/PFS
(“compensation”), while an HSA can taxpayer reaches age 59½. Withdrawals
be used to reduce any type of taxable from a Roth IRA are not taxable and “Unique and Under-Communicated
HSA Benefits,” with Kelley Long,
income. Contributions to either the not subject to the 10% additional tax on
CPA/PFS
traditional IRA or Roth IRA (or both) early distributions if they are made after
are limited to the lesser of $6,000 (in the taxpayer reaches age 59½ and the “The Power of Planning With High-
Deductible Health Plans,” with Ted
both 2021 and 2022) or taxable service- taxpayer has had a Roth IRA for at least
Sarenski, CPA/PFS
related compensation. An additional five years. Withdrawals of contributions
Conference
$1,000 is allowed for contributions to to a Roth IRA at any age are not taxable
the IRA account(s) by taxpayers who or subject to the 10% additional tax on Advanced Personal Financial
are age 50 by the end of the tax year, five early distributions. However, withdraw- Planning Conference at AICPA &
years younger than the 55 required for als of earnings from a Roth IRA gener- CIMA ENGAGE, June 6–8, Las
Vegas and online
the $1,000 addition for an HSA. ally are taxable and may be subject to the
Like contributions to an HSA, 10% additional tax on early distributions CPE self-study
contributions to a traditional IRA unless one of several exceptions applies. Retirement Planning Certificate
generally are deductible by taxpayers. Table 3 compares basic features of Program (Exam + Course)
It is also possible to structure exclud- traditional IRAs, Roth IRAs, and HSAs
Risk Management and Insurance
able employer contributions on behalf as investment vehicles. Planning Certificate Program (Exam
of employees under separate rules for a + Course)
Sec. 408(k) SEP IRA or a Sec. 408(p) Flexibility and tax benefits
For more information or to make
SIMPLE IRA. However, taxpayers with Taxpayers with HSAs receive tax and a purchase, visit aicpa.org/cpe-
an employer-provided retirement plan flexibility benefits when they pay learning or call the Institute at 888-
(e.g., Sec. 401(k)) can only deduct their medical costs using non-HSA funds. 777-7077.
IRA contribution if they have modest The tax benefit arises because HSA
amounts of income. Specifically, for withdrawals are tax-exempt income to Contributor
these taxpayers, the traditional IRA con- the extent that they are supported by
tribution deduction completely phases receipts for qualified medical expenses. Jeffrey Gramlich, Ph.D., is a profes-
out in 2022 when modified adjusted The flexibility arises because the sor of accounting at Washington State
gross income (MAGI) reaches $78,000 taxpayer can choose when to submit the University in Pullman, Wash. He is also
for single or head-of-household taxpay- receipts, accumulating them over time the director of the Hoops Institute of
ers, $129,000 for married-filing-jointly until the taxpayer chooses to make a Taxation Research and Policy. For more
taxpayers, or $10,000 for married-filing- tax-free withdrawal. Compared with information about this article, contact
separately taxpayers. either a traditional IRA or a Roth IRA, thetaxadviser@aicpa.org.
Contributions to a Roth IRA are not an HSA has the advantage that it accu-
deductible, in contrast with contribu- mulates tax-exempt income that can be
tions to both an HSA and a traditional withdrawn at any age, subject only to
IRA. Also, for Roth IRAs, contributions the requirement that the taxpayer can
are generally disallowed for higher- submit receipts for qualified medical
income taxpayers. In 2022, the amount expenses. ■

7. It is possible to circumvent Roth income limitations using a so-called backdoor Roth conversion strategy where the taxpayer contributes to a traditional IRA and, by
the end of the tax year, the traditional IRA is rolled into a Roth IRA so that no balance remains in any traditional SEP or SIMPLE IRA account at year end. Details of
this strategy are beyond the scope of this article.

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