Author Topic: Roth limited by taxable income earned?  (Read 1099 times)

better late

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Roth limited by taxable income earned?
« on: August 26, 2019, 07:43:48 PM »
I have a small job where I will earn roughly $10,000 this year. I am on track to put $7,000 into my 401k that is available to me at this job, leaving $3,000 as taxable income.

I realized recently that DH and I will be below the Roth AGI income limit this year and would like to invest the maximum we each are able into a Roth. I’m thinking he can contribute the full amount ($6,000 + $1,000 I think for being over 50).

Would I also be able to put in the maximum (as I earned $10,000) or would my contribution be limited to the amount I paid taxes on ($3,000)?

seattlecyclone

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Re: Roth limited by taxable income earned?
« Reply #1 on: August 26, 2019, 08:03:06 PM »
Take a look at IRS Publication 590-A for a description of what does and does not count as compensation for the purpose of allowing IRA contributions.

Of note, "amounts you exclude from income" do not count as compensation for this purpose. Pre-tax 401(k) contributions are excluded from income. Roth 401(k) contributions are not. Assuming the $7,000 of 401(k) contributions were made on a pre-tax basis, that would limit your allowable IRA contributions to the $3,000. But! If next year you put the $7k into a Roth 401(k) instead, I think you would still be allowed to contribute the full $10k to Roth IRAs between yourself and your spouse.

erutio

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Re: Roth limited by taxable income earned?
« Reply #2 on: August 26, 2019, 08:50:46 PM »
You can contribute the max to your Roth ira because you count your combined income with your spouse.

reeshau

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Re: Roth limited by taxable income earned?
« Reply #3 on: August 27, 2019, 02:26:02 AM »
You can contribute the max to your Roth ira because you count your combined income with your spouse.

Correct, as long as you are filing jointly.  My wife does not work outside the home, and we have made full Roth contributions each year.

better late

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Re: Roth limited by taxable income earned?
« Reply #4 on: August 27, 2019, 11:44:05 AM »
You can contribute the max to your Roth ira because you count your combined income with your spouse.

Correct, as long as you are filing jointly.  My wife does not work outside the home, and we have made full Roth contributions each year.

I thought that because I am covered by a 401k at work that we couldn’t do the “spousal ira” but I’m on the IRS website and I think I see that is not the case. Thank you for the help.