Roth IRA Salary Requirements
If you follow the rules set by the IRS, a Roth IRA allows you to enjoy tax-free income in retirement. You do not get an immediate tax break as you do with a traditional IRA, but you do get the promise of tax-free earnings once you retire. But not everyone can contribute to a Roth. The IRS sets income limits and guidelines that determine who is eligible to contribute to a Roth IRA.
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Single Taxpayers
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In 2011, single taxpayers can earn up to $107,000 in income and still make full Roth IRA contributions. Taxpayers making more than $107,000 can make a partial contribution, but as their income goes up, the amount they can contribute to a Roth goes down. Once a single taxpayer reaches $122,000 in income, that individual can no longer contribute to a Roth IRA at all.
Married Taxpayers
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The income limits for married taxpayers are a bit more generous. Married taxpayers in 2011 can earn up to $168,000 in combined household income and make full contributions to their IRA. By the time the combined income for the couple reaches $179,000, those taxpayers can no longer contribute to a Roth IRA.
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Phased Out Eligibility
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If you are over the income limits that allow you to make the full contribution to your Roth IRA, you may be able to make partial contributions to your plan. The Roth IRA contribution begins to phase out when you reach the lower income limit established by the IRS, but it does not phase out completely until you reach the maximum income limit. If your income falls within those Roth IRA limits or is near one of cutoff points, you may want to consult your accountant or tax expert to determine your precise contribution limit for a particular year.
Raising Limits
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The Roth IRA income limits established by the IRS do not remain static. Instead, the tax agency reviews those limits on an annual basis and makes changes as it deems them necessary. That means if you were over the limit and unable to make a Roth IRA contribution last year, you might be able to make at least a partial contribution for the current year. You can find the current Roth IRA income limits published on the IRS website and in a number of other offline and online financial publications as well.
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