The Roth IRA Federal Tax Rules

by Jane Meggitt

Roth Individual Retirement Accounts offer eligible participants the opportunity to invest after-tax dollars in retirement accounts with tax-free withdrawals after meeting age requirements. Unlike the traditonal IRA, there is no mandatory withdrawal rule for Roth IRAs. Federal tax rules for Roth IRAs focus on income limitations and early withdrawals.

Roth IRA Contribution Limits

At the time of publication, the maximum annual contribution for a Roth IRA is $5,000 for individuals under the age of 50 and $6,000 for those 50 and over, assuming the person earned that much in compensation. These are the same limits as the traditional IRA. Unlike the traditional IRA, contributions to a Roth IRA are not federally tax-deductible.

Income Limits

Currently, the income limits for Roth IRA contributions for taxpayers filing singly is an adjusted gross income of $107,000 or less to contribute the full amount. Single filers with an AGI between $107,000 and $122,000 may make a partial contribution, but if the AGI is over $122,000, no contribution is permitted. Married couples filing jointly may contribute the full amount to a Roth IRA if their combined AGI is less than $169,000. If the AGI is between $169,000 and under $179,000, they may make a partial contribution. Married couples with AGIs above $179,000 cannot make Roth IRA contributions.


As with traditional IRAs, those with Roth IRAs may begin making penalty-free withdrawals upon reaching the age of 59 1/2. For Roth IRAs, there is an additional requirement that the account must have been open for at least five years, counting from the beginning of the year in which the first contribution was made.Both traditional and Roth IRAs are subject to ordinary income tax along with a 10 percent penalty on early withdrawals. Unlike traditional IRA account holders, those with Roth IRAs may continue to make contributions if earning income past the age of 70 1/2. Since Roth IRAs do not have required minimum withdrawal regulations, these accounts may also be used for estate planning purposes.

Excess Contributions

If the account holder makes excess contributions into the Roth IRA, any contribution withdrawn before the tax filing deadline, usually April 15, is treated as if it were not contributed. Taxpayers filing extensions may also withdraw excess contributions by the extension date without penalty. Any earnings on excess contributions must also be withdrawn. Such earnings are subject to ordinary income tax.