How to Determine Your Reduced Roth IRA Contribution Limit
The Internal Revenue Service limits who can contribute to a Roth Individual Retirement Account based on their modified adjusted gross income, or MAGI. However, instead of setting one limit with people under the limit being able to contribute and people over the limit prohibited from contributing at all, the IRS uses a phaseout range. If your MAGI falls within the phaseout range, you will still be able to contribute some money to a Roth IRA, but, you will not be able to contribute the maximum amount.
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Instructions
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1
Subtract your modified adjusted gross income from the highest MAGI allowed for your filing status. For example, the highest limit for singles in 2010 equals $120,000, so if your MAGI equals $117,000, you would subtract $117,000 from $120,000 to get $3,000.
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2
Divide the result from step 1 by the size of the reduced contribution range for your filing status. For 2010, the reduced contribution range for singles goes from $105,000 to $120,000, or a a range of $15,000. Therefore, you would divide $3,000 by $15,000 to get 0.2.
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3
Look up what your maximum Roth IRA contribution would be ignoring the income restrictions in IRS Publication 590. As of 2010, the contribution cap equals $5,000 if you are under 50. People 50 and up can contribute $6,000. However, this limit can change annually.
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4
Multiply the result from step 2 by your maximum contribution before income considerations to find your maximum contribution. Completing the example, if you were 58, you would multiply $6,000 by 0.2 to find your reduced Roth IRA contribution limit would be $1,200.
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