SHORT VERSION: Is it legal for a taxpayer (who is in their 60s and eligible to make a fully-deductible TIRA contribution) to shift taxable income from last year to the this year by making a previous-year TIRA contribution and immediately withdrawing it ?

LONG VERSION: In order to avoid a big hit on IRMAA (in 2023, based on 2021 AGI), wife and I plan to make TIRA contributions before filing our 2021 MFJ return, reducing our joint MAGI by $14,000 (as I understand, we do NOT have to add back in TIRA deduction when computing MAGI for IRMAA purposes).

Problem is, she’s reluctant to do so, due to short-term cash flow issues.

Is it true that if she makes a TIRA contribution now (in early 2022), that she can immediately withdraw the funds, without penalty ? (We are both in our 60s). Effectively shifting taxable income from 2021 to 2022.

P.S. In case you’re wondering how we’re flirting with IRMAA and yet intend for our TIRA contributions to be fully-deductible … I am retired. She retired after working the first month or two of 2021. So she has enough compensation income to cover our 2 * $7000 contributions, but she elected not to participate in her employer’s retirement plan.

1 Answer 1


YES -- BUT if (either of) you have any 'basis' (past nondeductible contributions = posttax money) in your (respective) IRA, the distribution will include some of it; i.e. you can't take out specifically the new money, but must take pro-rata from the total.

You can even take the distributions first and then make the contributions, if that helps with cash flow, as long as you complete the contributions by the filing deadline (April 18 this year) and designate them as prior-year -- preferably a few days before so you have time to fix any problem. (Back in the '80s when I was young and imprudent, a few times I walked into a bank on April 15 to make a prior-year contribution, and at least once it didn't clear that day and cost me in tax.) It doesn't matter when you file; if you file early you still have until the deadline to contribute, while if you file late (e.g. with extension) you only have until the (normal) deadline to contribute.

(I once did effectively the same thing with an HSA, to avoid a tax credit limit rather than IRMAA, but as Medicare eligibles you can no longer contribute to HSA(s).)

  • Ok thanks. I was hoping for an "answer from a reputable source" (not to say you aren't), but maybe I'm asking you to prove a negative. Certainly my googlings have not found anything to suggest this is forbidden. Is just seems a little to good to be true, that a person could magically move $7K of taxable income from one year to the next. Commented Mar 16, 2022 at 4:02
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    Yeah, since each txn by itself is common, the only problem could be a prohibition on the combination, whose nonexistence can't be pointed to. The whole point of trad IRA (and trad employer plans) is to defer taxable income -- usually most of a lifetime, not just one year -- and while that is one of the largest 'tax expenditures' (in government accounting terms) it is very clearly intended. Plus your one-year version only works well for people over 59.5 and still working -- a fairly small fraction of the population. Commented Mar 18, 2022 at 6:51

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