What Are the Self-Directed IRA Contribution Limits for 2022?

The Self-Directed IRA contribution limits for 2022 are $6,000 if you're younger than 50, $7,000 if you're 50 or older, or the amount of your taxable compensation for the year (if you earned less than the limit). This is true for any Traditional Self-Directed IRA or Roth IRA. However, it's important to pay attention to these contribution limits each year, as they can change from one year to the next.

couple speaking with a Self-Directed IRA custodian about their alternative investments.

What Is the Penalty for Going Over the Self-Directed IRA Contribution Limits in 2022?

If you exceed the annual contribution limit for your Self-Directed IRA, you'll incur a 6% tax penalty on the excess contribution. This is especially important to be mindful of whenever your taxable compensation is less than the contribution limit. If you contribute the maximum amount to your Self-Directed IRA at the start of the year but end up making less than expected, you may accidentally exceed your contribution limit.

Conversely, if you have a Roth IRA, you may also go over the Self-Directed IRA contribution limits in 2022 by earning more than you anticipated. This is because Roth IRAs can also have contribution limits imposed based on your income. If you have a higher income, your contribution limit for the year may be lower than you think.

How to Remedy an Over-Contribution to a Self-Directed IRA

Fortunately, fixing an over-contribution to a Self-Directed IRA is a simple and straightforward process. All you need to do to remedy the situation is withdraw the excess contribution from your account, including any income it earned, before your tax return due date. To obtain the necessary paperwork, contact your IRA custodian and inform them of the excess contribution.

If you only become aware of the over-contribution after filing your taxes, there are still steps you can take to avoid the 6% tax penalty. You can withdraw the excess contribution and then submit an amended tax return by the October extension deadline.

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