Roth Individual Retirement Account (Roth IRA) is a retirement plan used by many workers. It offers many advantages to potential retirees; however, they cannot exceed the income limitations of the Roth IRA, because it makes them ineligible to contribute to the retirement plan. Income limits change every year; however, the filing statuses are constant, and they make it easier for taxpayers to determine their income limitations. The filing statuses on federal income tax returns determine the income limitations of the Roth IRA. By using the modified adjusted gross income, and the age of the taxpayer determines the contribution limit of the Roth IRA.
The modified adjusted gross income of the taxpayer determines the eligibility for deductions on the federal return, and it sets income limitations for Roth IRA. There cannot be any contributions made to retirement plans when taxpayers exceed income limits. Modified adjusted gross income consists of total income of the taxpayer minus any deductions of certain expenses such as college tuition, student loan interest deductions, and few other expenses.
According to Revenue Service Publication 590 (Pub 590), income limits are used to determine who contributes to the Roth IRA. To contribute to the Roth IRA, the income of a taxpayer with a filing status of single with an income that ranges from 107,000 dollars but does not exceed 122,000 dollars, it reduces contribution limits of Roth IRA. Taxpayers with a filing status of single cannot contribute to a Roth IRA when their modified adjusted gross income exceeds 122,000 dollars. The 122,000 dollars is also the same income limitation for taxpayers who will have filing statuses of head of household and married filing separately.
The contribution of taxpayer with the filing status of single that is under the age of fifty and their income less than 107,000 dollars has a contribution limit of 5,000 dollars for the tax year. Taxpayers who are fifty years or older with filing status of single who does not have their contributions of their IRA reduced will have a contribution limit of 6,000 dollars for the tax year. The contribution limits of single tax filer will be similar for taxpayers filing head of household and married filing separately. When the contributions limits are reduced, a worksheet in Pub 590 is used to determine how much the taxpayer is allowed to contribute to their retirement plan. The worksheet is used to determine reduced contribution limit regardless of the filing status of the taxpayer.
In accordance with 590, taxpayers with filing statuses of married filing jointly will have their contribution limits reduced when their income is between 169,000 dollars but less than maximum income limit of 179,000 dollars. The filers using the married filing jointly status cannot contribute when their income surpasses the maximum income limit. Income limit drops drastically in regards to taxpayers with a filing status of married filing separately. At anytime married taxpayers who files separately lives with their spouse in a tax year, they are subjected to very low-income limits. They are not allowed to contribute to the Roth IRA if their modified adjusted gross income exceeds 10,000 dollars.
Any married taxpayers filing jointly can contribute 5,000 dollars to their retirement plan when their modified adjusted gross income does not exceed 169,000 dollars; however, if they are over fifty years of age the contribution limit increases to 6,000 dollars. With a modified adjusted gross income that is 169,000 dollars but, not higher than allowed income limit, taxpayers must utilize worksheet found in Pub 590 to calculate the reduced contribution limit.