You do not report Roth IRA contributions on your return.

A traditional IRA is any IRA that is not a Roth IRA or SIMPLE IRA. Traditional IRAs are discussed in chapter 1.

Contributions can be made to your Roth IRA regardless of your age.

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:

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? under Who Can Set Up a Traditional IRA? in chapter 1.

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

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

Do not subtract conversion income when figuring your other AGI-based phaseouts and taxable income, such as your deduction for medical and dental expenses. Subtract it from AGI only for the purpose of figuring your modified AGI for Roth IRA purposes.

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

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

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:

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

Simplified employee pensions (SEPs) are discussed in Publication 560. Savings incentive match plans for employees (SIMPLEs) are discussed in chapter 3.

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.

If the amount you can contribute must be reduced, figure your reduced contribution limit as follows.

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.

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

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. The earnings are considered earned and received in the year the excess contribution was made.

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.

You can convert amounts from a traditional IRA to a Roth IRA in any of the following three ways.

Conversions made with the same trustee can be made by redesignating the traditional IRA as a Roth IRA, rather than opening a new account or issuing a new contract.

For more information on conversions, see Converting From Any Traditional IRA Into a Roth IRA in chapter 1.

If the converted amount (contribution) is not recharacterized (explained in chapter 1), the contribution will be treated as a regular contribution to the Roth IRA and subject to the following tax consequences.

You must move the amount converted (including all earnings from the date of conversion) into a traditional IRA by the due date (including extensions) for your tax return for the year during which you made the conversion to the Roth IRA. You do not have to include this distribution (withdrawal) in income.

The basis of property distributed from a Roth IRA is its fair market value (FMV) on the date of distribution, whether or not the distribution is a qualified distribution.

If you withdraw contributions (including any net earnings on the contributions) by the due date of your return for the year in which you made the contribution, the contributions are treated as if you never made them. If you have an extension of time to file your return, you can withdraw the contributions and earnings by the extended due date. The withdrawal of contributions is tax free, but you must include the earnings on the contributions in income for the year in which you made the contributions.

If, within the 5-year period starting with the first day of your tax year in which you convert an amount from a traditional IRA to a Roth IRA, you take a distribution from a Roth IRA, you may have to pay the 10% additional tax on early distributions. You generally must pay the 10% additional tax on any amount attributable to the part of the amount converted (the conversion contribution) that you had to include in income. A separate 5-year period applies to each conversion. See Ordering Rules for Distributions, later, to determine the amount, if any, of the distribution that is attributable to the part of the conversion contribution that you had to include in income.

Unless one of the exceptions listed later applies, you must pay the additional tax on the portion of the distribution attributable to the part of the conversion contribution that you had to include in income because of the conversion.

You must pay the 10% additional tax in the year of the distribution, even if you had included the conversion contribution in an earlier year. You also must pay the additional tax on any portion of the distribution attributable to earnings on contributions.

Unless one of the exceptions listed below applies, you must pay the 10% additional tax on the taxable part of any distributions that are not qualified distributions.

You may not have to pay the 10% additional tax in the following situations.

Most of these exceptions are discussed earlier in chapter 1 under Early Distributions.

Determine the taxable amounts distributed (withdrawn), distributions, and contributions by grouping and adding them together as follows.

Add any recharacterized contributions that end up in a Roth IRA to the appropriate contribution group for the year that the original contribution would have been taken into account if it had been made directly to the Roth IRA.

Disregard any recharacterized contribution that ends up in an IRA other than a Roth IRA for the purpose of grouping (aggregating) both contributions and distributions. Also disregard any amount withdrawn to correct an excess contribution (including the earnings withdrawn) for this purpose.

You cannot use your Roth IRA to satisfy minimum distribution requirements for your traditional IRA. Nor can you use distributions from traditional IRAs for required distributions from Roth IRAs. See Distributions to beneficiaries, later.

Generally, the entire interest in the Roth IRA must be distributed by the end of the fifth calendar year after the year of the owner's death unless the interest is payable to a designated beneficiary over the life or life expectancy of the designated beneficiary. (See When Must You Withdraw Assets? (Required Minimum Distributions) in chapter 1.)

If paid as an annuity, the entire interest must be payable over a period not greater than the designated beneficiary's life expectancy and distributions must begin before the end of the calendar year following the year of death. Distributions from another Roth IRA cannot be substituted for these distributions unless the other Roth IRA was inherited from the same decedent.

If the sole beneficiary is the spouse, he or she can either delay distributions until the decedent would have reached age 70½, or treat the Roth IRA as his or her own.

A beneficiary can combine an inherited Roth IRA with another Roth IRA maintained by the beneficiary only if the beneficiary either:

If a distribution to a beneficiary is not a qualified distribution, it is generally includible in the beneficiary's gross income in the same manner as it would have been included in the owner's income had it been distributed to the IRA owner when he or she was alive.

If the owner of a Roth IRA dies before the end of:

each type of contribution is divided among multiple beneficiaries according to the pro-rata share of each. See Ordering Rules for Distributions, earlier in this chapter under Are Distributions Taxable.

If distributions from an inherited Roth IRA are less than the required minimum distribution for the year, discussed in chapter 1 under When Must You Withdraw Assets? (Required Minimum Distributions), you may have to pay a 50% excise tax for that year on the amount not distributed as required. For the tax on excess accumulations (insufficient distributions), see Excess Accumulations (Insufficient Distributions) under What Acts Result in Penalties or Additional Taxes? in chapter 1. If this applies to you, substitute “Roth IRA” for “traditional IRA” in that discussion.