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How much can you make to contribute to a Roth IRA?

 

Quick Summary

  • If you are single, you must have a modified adjusted gross income under $135,000 to contribute to a Roth IRA for the 2018 tax year, but contributions are reduced starting at $120,000. If you are married filing jointly, your MAGI must be less than $199,000, with reductions beginning at $189,000.

Note: For the 2018 tax year, you have from Jan. 1, 2018, to April 15, 2019, to make a contribution. Click here to see current Roth IRA contribution limits.

The Internal Revenue Service has a set of rules that individuals must meet to be qualified to invest in a Roth IRA. One set of rules pertains to income limits. If your income exceeds a certain amount you will not be allowed to contribute to a Roth IRA.

You Can Only Contribute “Earned Income”

To qualify for a Roth, you must have “earned income” in the year you want to make a contribution.

Earned income is money paid for work you performed (or in the case of a small business, profit distributions from the business). This income includes wages, salaries, tips, bonuses, commissions and self-employment income. In addition, “the IRS considers disability retirement benefits as earned income until you reach the minimum retirement age you could have received a pension or annuity,” says Joe Inskeep, CFP®, Advanced Wealth Strategies Group, Round Rock, Texas.

“Even income items like scholarships and fellowships taxable in box 1 of a W-2, jury duty pay and accrued vacation payments allow you to contribute to a Roth IRA,” says financial coach John Madison, CPA60 Minute Finance, in Ashland, Va.

Other income that counts includes taxable alimony and military differential pay. With regard to alimony, however, “this is only the case for 2018 as the Tax Cuts and Jobs Act of 2017 phases out the taxation of alimony to the recipient in 2019 [for separation and divorce agreements executed after Dec. 31, 2018],” says Jillian Nel, CFP®, CDFA, principal, Legacy Asset Management Inc., Houston, Texas.

Earned income does not include things like interest and dividends from investments, income from rental property, and pension payments. “You cannot include other types of income such as Social Security, K-1 Income (that is not earned), IRA distributions or any other income lines on page one of your tax return that are not actually earned income you pay payroll taxes on,” says Scott Bishop, CPA, PFS, CFP®, partner and executive vice president of financial planning, STA Wealth Management, LLC, Houston, Texas.

If your earned income for the year is less than the contribution limit (in 2018, $5,500 for those under 50), you can only contribute up to your earned income. In other words, if your earned income is $3,000, you can only contribute up to $3,000.

Income Limits and Tax Filing Status

2018 Roth IRA Income and Contribution Limits
Filing StatusIncome Limit1Contribution Limit
Married filing jointlyLess than $189,000$5,5002
$189,000 to $198,999Begin to phase out
$199,000 or moreIneligible for a direct Roth IRA (learn more about a “Backdoor Roth IRA”)
Married filing separately3$0$5,5002
$1 to $9,999Begin to phase out
Greater than $10,000Ineligible for a Roth IRA
SingleLess than $120,000$5,5002
$120,000 to $134,999Begin to phase out
$135,000 or moreIneligible for a direct Roth IRA (learn more about a “Backdoor Roth IRA”)

1Modified Adjusted Gross Income (MAGI) per IRS.

2Individuals age 50 and over can contribute up to $1,000 extra per year to “catch up” for a total of $6,500.

3Married (filing separately) can use the limits for single people if they have not lived with their spouse in the past year.

The IRS uses different rules for income limits based on your tax filing status for that year.

There are three categories that the IRS uses:

  • Married filing jointly or qualified widow(er)
  • Married filing separately
  • Single or head of household

The following is a summary of the current Roth IRA Income Limits.

Roth IRA Modified Adjusted Gross Income (MAGI)

When the IRS speaks of various income levels it is referring to modified adjusted gross income. To figure your modified adjusted gross income, you will need your adjusted gross income (AGI) from your tax return. You can use Appendix B, Worksheet 2 from IRS Publication 590-A to modify your AGI for Roth IRA purposes.

Roth IRA Income Limits for Single Filers

If you file as single, head of household or married filing separately (if you did not live with your spouse at any time during the year) your MAGI must be less than $120,000 to contribute up to the limit.

If your MAGI falls between $120,000 and $135,000 you cannot contribute the full amount. Your contribution is reduced. Use the IRS worksheet to calculate your new reduced Roth IRA contribution limit.

If your MAGI is $135,000 or more you cannot contribute to a Roth IRA.

Roth IRA Income Limits for Married Filers (Joint)

If you file as married filing jointly or as a qualifying widow(er) your MAGI must be less than $189,000 to contribute up to the limit.

If your MAGI falls between $189,000 and $199,000 you cannot contribute up to the limit. Your contribution is reduced. Use the IRS worksheet to calculate your new reduced Roth IRA contribution limit.

If your MAGI is $199,000 or more, you cannot contribute to a Roth IRA.

Roth IRA Income Limits for Married Filers (Separate)

The IRS severely limits the ability to contribute to a Roth IRA for individuals who are married but file separately and have lived with their spouses at any time during the year. If you do not have earned income you will not be allowed to contribute to a Roth IRA.

If your MAGI is less than $10,000 you cannot contribute up to the limit. Your contribution is reduced. Use the IRS worksheet to calculate your reduced Roth IRA contribution limit.

History of Roth IRA Income Limits

The Internal Revenue Service gradually increases the income limit to account for inflation. For more details, see:.

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