How to Calculate Your AGI for Roth Purposes

by Beverly Bird

Your adjusted gross income is a pivotal factor in calculating how much the IRS allows you to contribute to a Roth IRA plan each tax year. It's your income for tax purposes minus any deductions or exemptions, and it's the base point for your modified AGI, which determines the limit to your contributions. Although you don’t receive a tax deduction for your contributions, all the interest your Roth IRA earns and the distributions you take from it at retirement age are tax-free.

Locate your AGI on your last tax return. If you filed a 1040, you’ll find it on line 37. If you’re estimating your AGI for the current year, start with this number from last year. Review the information you entered on lines 7 through 35 of your return for income and deductions, then adjust each if you’ve experienced any increase or decrease since filing your last return. Recalculate your AGI for the current year with these adjustments.

Add back to your AGI the deduction you took for contributions to a traditional IRA, if you made any. This is located on line 32 of your 1040. However, if you converted your traditional IRA to a Roth plan, and if you realized any income from doing this, you can deduct that income from your AGI. You do not have to add back in any contributions you made to a 401k.

Add back any deductions you took on lines 33 and 34 of your 1040. These are for student loan interest and other educational expenses for you or your dependents, such as tuition.

Eliminate the deduction you took for domestic production activities on line 35 of your 1040, if any. You would only have taken this if you’re self-employed and you operate a construction or manufacturing business. Add this amount back to your AGI.

Look at Line 8b on your 1040. This is the space for interest earned that you did not have to include in your income for tax purposes, such as from certain savings bonds. It was not included as part of your AGI, but you must add this back in to calculate your modified AGI.

Add back to your income any money your employer contributed toward your expenses if you adopted a child during the tax year. As with income from savings bonds, you would not pay taxes on this, so it would not be included in your AGI. However, for purposes of calculating your modified AGI, you must add it back in.

Add any income you earned from foreign sources to your AGI. You would not have included this on your 1040 as income, but it counts toward your modified AGI. If you lived abroad and took a deduction for foreign housing, you must add this deduction back in also.

Tip

  • The number you come up with when you add back all required income and deductions to your AGI is your modified AGI. If it is $179,000 or more and you’re filing a joint married return, you can’t make Roth IRA contributions as of the 2011 tax year. If you’re single, your modified AGI limit is $122,000. If your modified AGI is between $169,000 and $179,000 on a joint married return, or between $107,000 and $122,000 and you’re single, you’re limited as to how much you can contribute to your Roth IRA, so speak with a tax professional.

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