Adjusted Income Limits for Roth IRAs Insurance Consultant

Adjusted Income Limits for Roth IRAs

Written on February 17, 2011 – 4:06 am | by Gabrielle Scanlan

The 2011 contribution limits regulated by the IRS are $5,000 per IRA owner. Owners 50 years or older have a higher limit of $6,000. The extra $1,000 is known as a catch-up contribution. Making full contributions requires meeting income guidelines. Going beyond 2011, limits will increase according to inflation indexing methods, generally $500 in years that warrant an increase. Legislative modifications can also adjust the limits.

Income limits determine who can contribute how much. The limits are a based on annual adjusted gross income. Whereas a traditional IRA owner can always make a full contribution but might not be able to make a full deduction for it, the Roth owner can not make a contribution if he exceeds income limits. The IRS has different limits for different tax filing statuses, with phaseout ranges in each category allowing partial contributions. Those over the phaseout income range are not allowed to contribute to Roth IRAs.

The 2011 Roth AGI limits have three categories. The first category includes those filing as single, head of household or married filing separate returns and not living together. The phaseout range is $107,000 to $122,000 for this category. The second category is a widow or married couple filing joint returns with a phaseout range of $169,000 to $179,000. The last category is for married couples filing separately but living together, with a phaseout range of $0 to $10,000.

Though a person might not qualify to make Roth contributions each year, there is the option of making traditional IRA contributions and converting the traditional IRA into a Roth. There is no income limit eligibility requirement for Roth conversions. For a traditional IRA owner who is taking the deduction, the taxes are paid as income taxes when converted. For the IRA owner who doesn’t qualify for a deduction, the contributions in the converted amount are not taxable; only the earnings are added to income tax.