Maximum Contributions for a Roth IRA
The Roth individual retirement account allows you to build up a retirement fund that will be free of federal income taxes when you withdraw from the Roth account at retirement. But contributions to a Roth IRA aren't tax deductible. While you don't report Roth IRA contributions or Roth IRA retirement distributions on your income tax form, there are limits on annual Roth IRA contributions.
Other People Are Reading
-
Income Qualification
-
To make any Roth IRA contribution, you must have taxable earned income. To make the maximum allowed contribution for the 2010 tax year, that income must be less than $167,000 for married couples filing jointly, or $105,000 for single taxpayers and for married persons filing separately who didn't live with their spouse all year. Married persons filing separately who lived with their spouse at any time of the year can't make a Roth contribution if their income exceeds a mere $10,000.
Contribution Limit
-
Your Roth IRA contribution is limited to the lesser of $5,000 or your total taxable compensation for 2010. If you are over age 50, the dollar limit increases by $1,000 to $6,000. But if you contribute to a traditional tax-deferred IRA and to a Roth IRA in the same year, then the $5,000/$6,000 limit covers both types of IRAs. For example, a taxpayer under age 50 who contributed $3,000 to his traditional IRA could only contribute $2,000 to his Roth IRA in the same year.
-
Reduced Contribution
-
If you are married filing jointly and earned between $167,000 and $177,000, or were single/married filing separately and earned between $105,000 and $120,000, your allowable Roth IRA contribution will gradually phase out, reaching zero if income exceeds $120,000/$177,000. If you are in this situation, the IRA offers a 10-step formula for figuring out your reduced Roth IRA contribution limit. These limits will rise by $2,000 for the 2011 tax year.
Other Contribution Rules
-
If you are married filing jointly with a non-working spouse, you can contribute to a Roth IRA in your spouse's name, using your income minus your IRA contributions to meet the taxable income test for your spouse. You can contribute up to the $5,000/$6,000 limit for your spouse's Roth IRA plus the $5,000/$6,000 you contributed to your own Roth IRA. If you contribute more than the allowed maximum to your Roth IRA, there is a 6 percent penalty tax on the excess contribution unless you withdraw the excess before the due date of your tax return. There won't be any withdrawal penalty in this case.
-
References
- Photo Credit Comstock Images/Comstock/Getty Images
