Image 1 Image 2 Image 3 Image 4

Income Limits for Roth IRA

A look at the world of Roth IRA limits and more investment details about these retirement plans.

The income limits for Roth IRA plans will vary depending upon a number of factors, and we’re going to take a look at them  here.  First, let’s go into a little background on Roth IRA accounts and IRAs in general.

Independent Retirement Accounts (or IRAs) are a savings scheme created by law in the United States that provide incentive and opportunity for taxpayers to save towards their retirement period. Although they are set up by law, there are various service providers licensed under the law for these.

The Roth IRA however, is an IRA that has a different incentive for those who open accounts under it. The different incentive that the Roth IRA provides has to do with the point at which their money becomes tax deductible. The income limits for Roth IRA accounts are also different.

Under certain eligibility criteria, people who open IRA accounts under the Roth IRA can make their IRA contributions from their compensation income. These savings become tax deductible when they are eligible for withdrawal.

The income limits for Roth IRA have been set by Congress to determine how much an individual may contribute annually to the Roth IRA account. It is very important to note that the requirement for minimum income earned has to be met in order for an individual to become eligible. The income from which an individual can make contributions is the taxable compensation. The actual terminology used is the Adjusted Gross Income, or the AGI.

Under the Roth IRA, each individual’s adjusted gross income puts a cap on the amount that the person may contribute each year. In other words, there are income limits for the Roth IRA. This amount, however, is not subject to being rolled into the next year. At the end of each year, every individual’s account is automatically reset, returning it to a fresh status against the coming year.

Couples who file jointly will have their adjusted gross income jointly assessed and determined for eligibility to contribute. If they are indeed eligible, then their AGI will also determine the amount of money they are eligible to contribute under the Roth IRA. If however, they file separately, the amount that they are allowed to file is small.

As earlier stated, the adjusted gross income of a couple is the major determining factor in their contribution limits for the Roth IRA. I will give you highlights of the stipulated AGI and the corresponding income limits for the Roth IRA below:

i. Where a couple has an Adjusted Gross Income of less than $166,000, their maximum annual contribution is capped at $5,000.

ii. This limit is increased to $6,000 if the couple has attained or exceeded the age of fifty.

iii. Where the adjusted gross income of the couple is between $166,000 and $176,000, there is a reduction in their contribution less than $5,000.

iv. If the couple has an adjusted gross income of more than $176,000, they will not be eligible to contribute under the Roth IRA.

v. An individual’s income according to his adjusted gross income determines what his income limits for Roth IRA
accounts will be. If it is between $101,000 and $116,000, the contribution reduces and continues to do so until it
gets to $120,000 at which point it is phased out.