Can I make a Roth contribution for my 1099 MISC (from earned income) If the taxable amount is zero since I used the above the line health insurance expense to reduce my taxable amount to zero?
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- posted
5 years ago
Roth Contribution
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- posted
5 years ago
There are two elements that are factors as to whether you can contribute to a Roth IRA: 1. Do you have taxable compensation and 2. Is your Modified AGI below a certain threshold. Your taxable income is irrelevant. Details are in IRS PUB 590A.
When you have self-employment income (e.g., you have a Schedule C) your taxable compensation is your net profit minus any contributions you made to a retirement plan (Sched 1 Line 28) and minus the 1/2 of SE tax you deducted (Sched 1 Line 27).
Your Modified AGI is your AGI (1040 Line 7) plus the sum of all of the following: Sched 1 Lines 32, 33 & 36, foreign income/housing deduction from the 2555, excluded savings bond interest from the 8815 and employer provided adoption benefits from the 8839.
So, what does this mean for the SE Health Insurance deduction and a Roth IRA:
- It has no impact to your taxable compensation.
- It lowers your MAGI which can be a benefit for a Roth contribution if your MAGI is too high.
Lastly, it also lowers the amount that is used for the QBID (Qualified Business Income Deduction).