How to Contribute to a Roth IRA. The Roth IRA was established in 1998 to provide people in lower income brackets with a way to contribute to an individual retirement account. The tax structure of the Roth IRA is advantageous for many and allows for people to contribute at a reasonable rate as well as withdraw funds without penalty under certain conditions.
Calculate your modified adjusted gross income (MAGI). Though there are a number of benefits to having a Roth IRA, including being able to withdraw the money before retirement for educational expenses or buying a home, there are income limits governing who can contribute to a Roth IRA. If your income rises above a certain level, there is a phase-out of contributions. The allowable MAGI guidelines also vary depending on your taxable status.
Know the upper limits of contribution to your Roth IRA. In addition to your MAGI being used to decide if you can make a full or partial contribution to the IRA, the limits vary depending on your age and are capped at a certain amount. They increase incrementally every year based on inflation but are typically under $1,000 per year.
Do not try to deduct your Roth IRA contributions. Unlike with a traditional IRA, contributions to your Roth IRA are not tax-deductible. However, you may withdraw your contributions at any time with no penalty attached.
Limit your traditional IRA contributions when it makes financial sense. Some contributions to a regular IRA reduce the eligible amount of money you can contribute to your Roth IRA. This does not include contributions to 401(k) or 403(b) plans, though, because elective referral contributions to an employer-based plan cannot be counted against your Roth IRA contribution.
Take advantage of spousal contribution rules when applicable. Each spouse can own a Roth IRA, and a married couple may each contribute the maximum limit to both accounts. That means you can contribute twice as much to each account each year.