Can I Contribute to a Roth IRA?

Generally, you can contribute to a Roth IRA if you have taxable compensation (defined later) and your modified AGI (defined later) is less than:

• $160,000 for married filing jointly,
• $10,000 for married filing separately and you lived with your spouse at any time during the year, and
• $110,000 for single, head of household, qualifying widow(er) or married filing separately and you did not live with your spouse at any time during the year.

Is there an age limit for contributions? Contributions can be made to your Roth IRA regardless of your age.

Can I contribute to a Roth IRA for my spouse? You can contribute to a Roth IRA for your spouse provided the contributions satisfy the spousal IRA limit (discussed in chapter 1 under How Much Can Be Contributed?) and your modified AGI is less than:

• $160,000 for married filing jointly,
• $10,000 for married filing separately and you lived with your spouse at any time during the year, and
• $110,000 for married filing separately and you did not live with your spouse at any time during the year.

Compensation. Compensation includes wages, salaries, tips, professional fees, bonuses, and other amounts received for providing personal services. It also includes commissions, self-employment income, and taxable alimony and separate maintenance payments. For more information, see What Is Compensation? in chapter 1.

Table 2-1. Effect of Modified AGI on Roth IRA Contribution

This table shows whether your contribution to a Roth IRA is affected by the amount of your modified adjusted gross income (modified AGI).

Modified AGI. Your modified AGI for Roth IRA purposes is your adjusted gross income (AGI) as shown on your return modified as follows.

1. Subtract any income resulting from the conversion of an IRA (other than a Roth IRA) to a Roth IRA (conversion income). Conversions are discussed under Can I Move Amounts Into a Roth IRA, later.
2. Add the following deductions and exclusions:
1. Traditional IRA deduction,
2. Student loan interest deduction,
3. Foreign earned income exclusion,
4. Foreign housing exclusion or deduction,
5. Exclusion of qualified bond interest shown on Form 8815, and
6. Exclusion of employer-paid adoption expenses shown on Form 8839.

For tax years beginning after December 31, 2001, you will also add any deduction for qualified tuition and related expenses.

You can use Worksheet 2-1 to figure your modified AGI.

Worksheet 2-1. Modified Adjusted Gross Income for Roth IRA Purposes

Use this worksheet to figure your modified adjusted gross income for Roth IRA purposes.

If the result is more than the modified AGI limit and you have other income or loss items, such as social security income or passive activity losses, that are subject to AGI-based phaseouts, you can refigure your AGI solely for the purpose of figuring your modified AGI for Roth IRA purposes. Refigure your AGI without taking into account any income from conversions. (If you receive social security benefits, use Worksheet 1 in Appendix B to refigure your AGI.) Then go to 2) above under Modified AGI or line 4 above in Worksheet 2-1 to refigure your modified AGI.

Conversion income must be taken into account when computing other AGI-based phaseouts and taxable income. You disregard conversion income only for the purpose of figuring your modified AGI for Roth IRA purposes.

How Much Can Be Contributed?

The contribution limit for Roth IRAs depends on whether contributions are made only to Roth IRAs or to both traditional IRAs and Roth IRAs.

Roth IRAs only. If contributions are made only to Roth IRAs, your contribution limit generally is the lesser of:

• $2,000 for 2001 ($3,000 for 2002 or $3,500 for 2002 if you are 50 or older), or
• Your taxable compensation.

However, If your modified AGI is above a certain amount, your contribution limit may be reduced, as explained later under Contribution limit reduced.

Roth IRAs and traditional IRAs. If contributions are made to both Roth IRAs and traditional IRAs established for your benefit, your contribution limit for Roth IRAs generally is the same as your limit would be if contributions were made only to Roth IRAs, but then reduced by all contributions (other than employer contributions under a SEP or SIMPLE IRA plan) for the year to all IRAs other than Roth IRAs.

This means that your contribution limit is the lesser of:

• $2,000 for 2001 ($3,000 for 2002 or $3,500 for 2002 if you are 50 or older) minus all contributions (other than employer contributions under a SEP or SIMPLE IRA plan) for the year to all IRAs other than Roth IRAs, or
• Your taxable compensation minus all contributions (other than employer contributions under a SEP or SIMPLE IRA plan) for the year to all IRAs other than Roth IRAs.

However, if your modified AGI is above a certain amount, your contribution limit may be reduced, as explained later under Contribution limit reduced.

Simplified employee pensions (SEPs) are discussed in chapter 3. Savings incentive match plans for employees (SIMPLEs) are discussed in chapter 4.

Contribution limit reduced. If your modified AGI is above a certain amount, your contribution limit is gradually reduced. Use Table 2-1 to determine if this reduction applies to you.

Figuring the reduction. If your modified AGI is within the range shown in Table 2-1 for your filing status, figure your reduced contribution limit as follows.

1. Start with your modified AGI.
2. Subtract from the amount in (1):
1. $150,000 if filing a joint return,
2. $-0- if married filing a separate return, and you lived with your spouse at any time during the year, or
3. $95,000 for all other individuals.
3. Divide the result in (2) by $15,000 ($10,000 if filing a joint return or married filing a separate return).
4. Multiply the maximum contribution limit (before reduction by this adjustment and before reduction for any contributions to traditional IRAs) by the result in (3).
5. Subtract the result in (4) from the maximum contribution limit before this reduction. The result is your reduced contribution limit.

You can use Worksheet 2-2 to figure the reduction.

Worksheet 2-2. Determining Your Reduced Roth IRA Contribution Limit

Before using this worksheet, check Table 2-1 to determine whether or not your Roth IRA contribution limit is reduced. If it is, use this worksheet to determine how much it is reduced.

Round your reduced contribution limit up to the nearest $10. If your reduced contribution limit is more than $0, but less than $200, increase the limit to $200.

Example. You are a single individual with taxable compensation of $113,000. You want to make the maximum allowable contribution to your Roth IRA for 2001. Your modified AGI for 2001 is $100,000. You have not contributed to any traditional IRA, so the maximum contribution limit before the modified AGI reduction is $2,000. Using the steps described above, you figure your reduced Roth IRA contribution of $1,340 as shown on Filled-in Worksheet 2-2.

Filled-in Worksheet 2-2. Example of Determining Your Reduced Roth IRA Contribution Limit

Before using this worksheet, check Table 2-1 to determine whether or not your Roth IRA contribution limit is reduced. If it is, use this worksheet to determine how much it is reduced.

When Can I Make Contributions?

You can make contributions to a Roth IRA for a year at any time during the year or by the due date of your return for that year (not including extensions).

What If I Contribute Too Much?

A 6% excise tax applies to any excess contribution to a Roth IRA.

Excess contributions. These are the contributions to your Roth IRAs for a year that equal the total of:

1. Amounts contributed for the tax year to your Roth IRAs (other than amounts properly and timely rolled over from a Roth IRA or properly converted from a traditional IRA, as described later) that are more than your contribution limit for the year (explained earlier under How Much Can be Contributed?), plus
2. Any excess contributions for the preceding year, reduced by the total of:
1. Any distributions out of your Roth IRAs for the year, plus
2. Your contribution limit for the year minus your contributions to all your IRAs for the year.

Withdrawal of excess contributions. For purposes of determining excess contributions, any contribution that is withdrawn on or before the due date (including extensions) for filing your tax return for the year is treated as an amount not contributed. This treatment only applies if any earnings on the contributions are also withdrawn and are reported as income earned and receivable in the year the contribution was made.

Applying excess contributions. If contributions to your Roth IRA for a year were more than the limit, you can apply the excess contribution in one year to a later year if the contributions for that later year are less than the maximum allowed for that year.

Previous| First | Next

Publication Index | IRS-Forms Main | Home