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Contributing to Roth IRA and Income limits

On

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it says that the amount you can contribute to a roth ira is based on your modified adjusted gross income (MAGI). This would be line 37 from your 1040 (your AGI) plus certain deductions like student loan interest and other tex exemptions. So if you have these, your MAGI would be higher than your AGI. So I take from that if your MAGI is under $120k, you can contribute the full $5500 ($6500 over 50 years of age). Between $120k and $135k it phases out, and above $135k you cannot contribute to a Roth IRA.

However on the calculator at

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it starts off asking for "gross combined income". Surely this is not correct. Gross income is not the same as MAGI.

So on which income is Roth Ira eligibility based?

thanks

Roger

Reply to
rogermccarrick
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If you go to the bottom of the page for the rothira.com link you posted, you will find another link to 2017 Roth IRA Income Limits. That page tells you it is MAGI and points you to IRS Pub 590-A for the definition. You can use Worksheet 2-1 in IRS Pub 590-A to calculate your MAGI.

Reply to
Alan

Thanks for the reply.

So I start out January 2017 with $450 per month auto paid into my Roth IRA and and by December I have contributed $5400. Then in Jan 2018 I get my W2 and I see, oh crap, my MAGI is in that phase out limit. So now I have to go back and calculate and find that I was only allowed to contribute $4700. It's a bit late now because I've over contributed. And I don't know what salary my 2018 W2 is going to show, so there's a good chance I may have over contributed by the time I see that 2018 W2 in Jan 2019.

I guess one would have to just go through the process of taking back excess contributions each year.

thanks Roger

Reply to
rogermccarrick

It's not too late. You have until the filing deadline (usually April 15) to withdraw the excess contribution.

Reply to
Barry Margolin

Alternately, particularly if you are really on the cusp of the phase-out, you could just wait until you have your MAGI for 2018 computed early in 2019 and make your Roth IRA contribution then. Since you have until the filing deadline to contribute, you could make the contribution after you know your income.

You do potentially give up a year's worth of growth, but unless you are investing in bitcoin, giving up that potential growth may be worth the simplification of your taxes.

Reply to
taruss

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