Can I Deduct a Roth IRA Contribution on My Individual Taxes?

by Jane Meggitt

Unlike a traditional Individual Retirement Account, Roth IRAs cannot be deducted from your individual taxes. However, these accounts, funded with after-tax dollars, have advantages that traditional IRAs do not, even without the deductibility factor. Contributions to a Roth IRA do not require reporting on the tax return. Consult your accountant or financial adviser to decide whether a traditional IRA or Roth IRA makes the most sense in your situation.

Contribution Limits

At the time of publications, individuals under the age of 50 may contribute up to $5,000 annually to a Roth IRA, and those over age 50 may contribute up to $6,000, as long as the account owner earned at least that much in income. While Roth IRA contributions may be made to more than one account, the total amount contributed to all accounts cannot exceed these annual limits.

Income Limits

As of the time of publication, the income limits for Roth IRA contributions for single filers is an adjusted gross income of $107,000 or less in order to make a full contribution. A single filer with an AGI between $107,000 and $122,000 may make a partial contribution. Those with an AGI over $122,000 may not contribute to a Roth IRA. Married couples filing jointly may have an AGI of up to $169,000 to contribute the full amount, and an AGI between $169,000 and under $179,000 to make a partial contribution. If their AGI is above $179,000, married couples filing jointly cannot contribute to Roth IRAs.

Roth IRA Advantages

Unlike traditional IRAs, which require mandatory distributions by the age of 70 1/2, Roth IRAs have no mandatory distribution requirement and owners do not ever have to withdraw funds. Those over the age of 70 1/2 may continue to make annual Roth IRA contributions if meeting income requirements, unlike traditional IRA owners. Withdrawals from Roth IRAs are tax-free. Since no withdrawals are required, some Roth IRA owners use these accounts in estate-planning decisions.

Penalties for Early Withdrawal

Like traditional IRAs, the Internal Revenue Service levies ordinary income tax payments and additional penalties if the owner of a Roth IRA makes withdrawals before the age of 59 1/2. The additional tax penalty is 10 percent of the withdrawn amount. There are exceptions to the additional tax rule, although not the ordinary income tax. Withdrawals may be made without the additional penalty if the account owner becomes disabled; uses the funds to purchase a first home; pays for higher education expenses for the the owner, spouse or child or pays for medical expenses exceeding 7.5 percent of the adjusted gross income (AGI).

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