Roth IRA Contributions – IRS Rules

Roth IRA Contributions – IRS Rules




Confused about whether you can contribute to a Roth IRA? Try using these simple rules:

Income

To contribute to a Roth IRA, you must have compensation (e.g., wages, salary, tips, specialized fees, bonuses). Your alternation modificated gross income must be less than:

$160,000 — Married Filing Jointly.

$10,000 — Married Filing Separately (and you lived with your spouse at any time during the year).

$110,000 — Single, Head of Household, or Married Filing Separately (and you did not live with your spouse during the year).

Age

There is no age limitation for Roth IRA contributions. Unlike traditional IRAs, you can be any age and nevertheless qualify to contribute to a Roth IRA.

Contribution Limits

In general, if your only IRA is a Roth IRA, the maximum 2005 contribution limit is the lesser of your taxable compensation or $4,000. For individuals age 50 or older, the contribution limit is $4,500

The maximum contribution limit phases out if your alternation modificated gross income is within these limits:

$150,000-$160,000 — Married Filing Jointly

$0-$10,000 — Married Filing Separately (and you lived with your spouse at any time during the year)

$95,000-$110,000 — Single, Head of Household, or Married Filing Separately (and you did not live with your spouse)

Contributions to Spousal Roth IRA

You can make contributions to a Roth IRA for your spouse provided you meet the income requirements.

When to Make Contributions

Contributions to a Roth IRA can be made at any time during the year or by the due date of your return for that year (not including extensions). Roth IRA contributions are not tax deductible and are not reported on your tax return. however, you do not include in your gross income, and consequently are not taxed on, any qualified distributions or distributions that are a return of your regular Roth IRA contributions or that are rolled over into another Roth IRA.

The Roth IRA is an incredibly valuable retirement means since distributions are made tax-free. If you are considering retirement planning, make sure to probe the Roth.




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