How Much Must One Earn to Contribute to a Roth IRA?

by Craig Woodman

Opening a Roth IRA is a smart move for any qualifying taxpayer saving for retirement. A big benefit of a Roth account is that any withdrawals made at retirement age, including the earnings on the account, are tax free. In addition, a saver can withdraw the contributions he has made to a Roth IRA at any time without taxes or penalties. The IRS imposes income requirements to determine who can contribute to a Roth.

Minimum Earnings

To contribute to a Roth IRA, you must have taxable compensation. This generally from employment or self-employment, but taxable alimony qualifies as well. If your only source of income is a gift, you will not be able to contribute to a Roth IRA. In addition, your Roth contribution for the year is limited to the amount of your taxable compensation. If you are a student with a part-time job earning $2,500 per year, that is the most that you can contribute to a Roth IRA.

Maximum Income

The maximum modified adjusted gross income (MAGI) to qualify for a Roth IRA is $177,000 for married people filing joint returns. The amount drops to $120,000 for single or head-of-household filers, or for married people filing separately if they did not live with their spouse all year. Married people living together and filing separately must have adjusted gross incomes (AGIs) of less than $10,000 to qualify. Allowable Roth contributions begin to phase out at $167,000 for married joint filers, and $110,000 for single or head of household filers. Married separate filers see the maximum contribution phase out with their first dollar of adjusted gross income.

Modified AGI

Roth contribution income limits are based on a modified adjusted gross income. This calculation is based on the adjusted gross income on a taxpayer's tax form, with certain deductions added back in. Deductions taken for traditional IRA contributions, as well as student loan interest are added to a taxpayer' AGI to determine eligibility for a Roth, as well as some foreign tax exclusions and savings bond interest exclusions.

Other Roth Factors

As of the time of publication, the maximum amount an eligible person can contribute to a Roth IRA is $5,000. People over age 50 1/2 can contribute an additional $1,000 for catch-up contributions. A spouse who does not work and files a joint tax return is still eligible for her own Roth account with the same limits. An eligible person can make a Roth contribution at any age, and also does not have to make any required withdrawals.

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