For 2008 the Roth IRA contribution limit is basically $5,000.00 ($6,000.00 if you are age 50 or older). You may contribute an additional $3,000.00, if you participated in a 401k plan where the employer who maintained the plan went into bankruptcy. There are, however, some conditions that must be met in order to avail of the additional $3,000.00 contribution, i.e. the employer matched at least 50% of your contribution to the plan with stock of the company, you have been a participant in the plan for 6 months before the employer went into bankruptcy, the employer (or a controlling corporation) have been a debtor in a bankruptcy case in an earlier year, and the employer (or any other person) have been subject to indictment or conviction based on business transactions related to the bankruptcy. If you chose to avail of the additional $3,000.00 contribution, the $6,000.00 limit for individuals age 50 or older will no longer apply. The most that can be contributed to your Roth IRA is the smaller of $8,000.00 or your taxable compensation for the year. If your taxable compensation for the year is less than the basic limit your taxable compensation for the year becomes your limit. Your limit is further reduced by your contributions for the year to all IRAs other than Roth IRA.
The basic limit of $5,000.00 ($6,000.00 if you are age 50 or older) applies only when your modified adjusted gross income is 1. less than $159,000.00 with a filing status of married filing jointly or qualifying widow(er), 2. zero dollars with a filing status of married filing separately and you lived with your spouse at any time during the year, and 3. less than $101,000.00 with a filing status of single, head of household or married filing separately and you did not live with your spouse at any time during the year. A worksheet in calculating the modified adjusted gross income for Roth IRA purposes is provided by the IRS.
If the modified adjusted gross income figures shown in the preceding paragraph are reached or surpassed, the amount you can contribute is reduced to an amount calculated in accordance with a worksheet provided by IRS. You can not contribute to a Roth IRA when your modified adjusted gross income is 1. $169,000.00 or more with filing status of married filing jointly or qualifying widow(er), 2. $10,000.00 or more with filing status of married filing separately and you lived with your spouse at any time during the year, and 3. $116,000.00 or more with filing status of single, head of household, or married filing separately and you did not live with your spouse at any time during the year.
It might be worthwhile to note that the best time to contribute to a Roth IRA is after accomplishing your income tax return or by the due date of your return for that year which is April 15 of the following year.