taxmap/pub17/p17-093.htm#en_us_publink100033700Regardless of your age, you may be able to establish and make nondeductible contributions to a retirement plan called a Roth IRA.
taxmap/pub17/p17-093.htm#en_us_publink100033701You do not report Roth IRA contributions on your return.
taxmap/pub17/p17-093.htm#en_us_publink100033702A Roth IRA is an individual retirement plan that, except as explained in this chapter, is subject to the rules that apply to a traditional IRA (defined earlier). It can be either an account or an annuity. Individual retirement accounts and annuities are described in Publication 590.
To be a Roth IRA, the account or annuity must be designated as a Roth IRA when it is set up. A deemed IRA can be a Roth IRA, but neither a SEP IRA nor a SIMPLE IRA can be designated as a Roth IRA.
Unlike a traditional IRA, you cannot deduct contributions to a Roth IRA. But, if you satisfy the requirements, qualified distributions (discussed later) are tax free. Contributions can be made to your Roth IRA after you reach age 701/2 and you can leave amounts in your Roth IRA as long as you live.
taxmap/pub17/p17-093.htm#en_us_publink100033703You can set up a Roth IRA at any time. However, the time for making contributions for any year is limited. See
When Can You Make Contributions, later under
Can You Contribute to a Roth IRA?Generally, you can contribute to a Roth IRA if you have taxable compensation (defined later) and your modified AGI (defined later) is less than:
- $169,000 for married filing jointly or qualifying widow(er),
- $116,000 for single, head of household, or married filing separately and you did not live with your spouse at any time during the year, or
- $10,000 for married filing separately and you lived with your spouse at any time during the year.
 | You may be eligible to claim a credit for contributions to your Roth IRA. For more information, see chapter 37. |
taxmap/pub17/p17-093.htm#en_us_publink100033706Contributions can be made to your Roth IRA regardless of your age.
taxmap/pub17/p17-093.htm#en_us_publink100033707You can contribute to a Roth IRA for your spouse provided the contributions satisfy the spousal IRA limit (discussed in
How Much Can Be Contributed under
Traditional IRAs), you file jointly, and your modified AGI is less than $169,000.
Compensation includes wages, salaries, tips, professional fees, bonuses, and other amounts received for providing personal services. It also includes commissions, self-employment income, nontaxable combat pay, and taxable alimony and separate maintenance payments.
taxmap/pub17/p17-093.htm#en_us_publink100033709Your modified AGI for Roth IRA purposes is your adjusted gross income (AGI) as shown on your return modified as follows.
- Subtract the following.
- Roth IRA conversions included on Form 1040, line 15b; or Form 1040A, line 11b.
- Roth IRA rollovers from qualified retirement plans included on Form 1040, line 16b; or Form 1040A, line 12b.
- Minimum required distributions from IRAs (for conversions and rollovers from qualified retirement plans only).
- Add the following deductions and exclusions:
- Traditional IRA deduction,
- Student loan interest deduction,
- Tuition and fees deduction,
- Domestic production activities deduction,
- Foreign earned income exclusion,
- Foreign housing exclusion or deduction,
- Exclusion of qualified savings bond interest shown on Form 8815, and
- Exclusion of employer-provided adoption benefits shown on Form 8839.
You can use Worksheet 17-2 to figure your modified AGI.
taxmap/pub17/p17-093.htm#w15160x11 | Worksheet 17-2. Modified Adjusted Gross Income for Roth IRA Purposes Use this worksheet to figure your modified adjusted gross income for Roth IRA purposes.
| 1. | | Enter your adjusted gross income from Form 1040, line 38; or Form 1040A, line 22 | 1. | | | 2. | | Enter any income resulting from the conversion of an IRA
(other than a Roth IRA) to a Roth IRA, a rollover from a qualified retirement plan to a Roth IRA, and a minimum required distribution from an IRA (for conversions and rollovers from qualified retirement plans only) | 2. | | | 3. | | Subtract line 2 from line 1 | 3. | | | 4. | | Enter any traditional IRA deduction from Form 1040, line 32; or Form 1040A, line 17 | 4. | | | 5. | | Enter any student loan interest deduction from Form 1040, line 33; or Form 1040A, line 18 | 5. | | | 6. | | Enter any tuition and fees deduction from Form 1040, line 34; or Form 1040A, line 19 | 6. | | | 7. | | Enter any domestic production activities deduction from Form 1040, line 35 | 7. | | | 8. | | Enter any foreign earned income and/or housing exclusion from Form 2555, line 45; or Form 2555-EZ, line 18 | 8. | | | 9. | | Enter any foreign housing deduction from Form 2555, line 50 | 9. | | | 10. | | Enter any excludable savings bond interest from Form 8815, line 14 | 10. | | | 11. | | Enter any excluded employer-provided adoption benefits from Form 8839, line 30 | 11. | | | 12. | | Add the amounts on lines 3 through 11 | 12. | | | 13. | | Enter:
• $169,000 if married filing jointly or qualifying widow(er)
• $10,000 if married filing separately and you lived with your
spouse at any time during the year
• $116,000 for all others | 13. | | If yes,
If no, | Is the amount on line 12 more than the amount on line 13?
then see the Note below.
then the amount on line 12 is your modified AGI for Roth IRA purposes. | | | | | Note. If the amount on line 12 is more than the amount on line 13 and you have other income or loss items, such as social security income or passive activity losses, that are subject to AGI-based phaseouts, you can refigure your AGI solely for the purpose of figuring your modified AGI for Roth IRA purposes. When figuring your modified AGI for conversion purposes, refigure your AGI without taking into account any income from conversions or minimum required distributions from IRAs. (If you receive social security benefits, use Worksheet 1 in Appendix B of Publication 590 to refigure your AGI.) Then go to list item (2) under Modified AGI or line 3 above in Worksheet 17-2 to refigure your modified AGI. If you do not have other income or loss items subject to AGI-based phaseouts, your modified AGI for Roth IRA purposes is the amount on line 12. |
|
taxmap/pub17/p17-093.htm#en_us_publink100033710The contribution limit for Roth IRAs generally depends on whether contributions are made only to Roth IRAs or to both traditional IRAs and Roth IRAs.
taxmap/pub17/p17-093.htm#en_us_publink100033711If contributions are made only to Roth IRAs, your contribution limit generally is the lesser of the following amounts.
- $5,000 ($6,000 if you are 50 or older in 2008).
- Your taxable compensation.
However, if your modified AGI is above a certain amount, your contribution limit may be reduced, as explained later under
Contribution limit reduced. If contributions are made to both Roth IRAs and traditional IRAs established for your benefit, your contribution limit for Roth IRAs generally is the same as your limit would be if contributions were made only to Roth IRAs, but then reduced by all contributions for the year to all IRAs other than Roth IRAs. Employer contributions under a SEP or SIMPLE IRA plan do not affect this limit.
This means that your contribution limit is the lesser of the following amounts.
- $5,000 ($6,000 if you are 50 or older in 2008) minus all contributions (other than employer contributions under a SEP or SIMPLE IRA plan) for the year to all IRAs other than Roth IRAs.
- Your taxable compensation minus all contributions (other than employer contributions under a SEP or SIMPLE IRA plan) for the year to all IRAs other than Roth IRAs.
However, if your modified AGI is above a certain amount, your contribution limit may be reduced, as explained later under
Contribution limit reduced. If you participated in a 401(k) plan and the employer who maintained the plan went into bankruptcy, you may be able to contribute an additional $3,000 to your IRA. See Publication 590 to see if you qualify to make these additional contributions. If you qualify and choose to make these catch-up contributions, the higher contribution and deduction limits for individuals who are age 50 or older do not apply. The most that you can contribute to your Roth IRA is $8,000.
taxmap/pub17/p17-093.htm#en_us_publink100033714If your modified AGI is above a certain amount, your contribution limit is gradually reduced. Use Table 17-3 to determine if this reduction applies to you.
taxmap/pub17/p17-093.htm#f15160x04
Table 17-3. Effect of Modified AGI on Roth IRA Contribution
This table shows whether your contribution to a Roth IRA is affected by the amount of your modified adjusted gross income (modified AGI).
| IF you have taxable compensation and your filing status is... | | AND your modified
AGI is... | | THEN... |
|---|
married filing jointly, or
qualifying widow(er) | | less than $159,000 | | you can contribute up to $5,000 ($6,000 if you are 50 or older in 2008). |
| | at least $159,000
but less than $169,000 | | the amount you can contribute is reduced as explained under Contribution limit reduced in Publication 590. |
| | $169,000 or more | | you cannot contribute to a Roth IRA. |
| married filing separately and you lived with your spouse at any time during the year | | zero (-0-) | | you can contribute up to $5,000 ($6,000 if you are 50 or older in 2008). |
| | more than zero (-0-)
but less than $10,000 | | the amount you can contribute is reduced as explained under Contribution limit reduced in Publication 590. |
| | $10,000 or more | | you cannot contribute to a Roth IRA. |
single,
head of household, or married filing separately and you did not live with your spouse at any time during the year | | less than $101,000 | | you can contribute up to $5,000 ($6,000 if you are 50 or older in 2008). |
| | at least $101,000
but less than $116,000 | | the amount you can contribute is reduced as explained under Contribution limit reduced in Publication 590. |
| | $116,000 or more | | you cannot contribute to a Roth IRA. |
taxmap/pub17/p17-093.htm#en_us_publink100033715If the amount you can contribute to your Roth IRA is reduced, see Publication 590 for how to figure the reduction.
taxmap/pub17/p17-093.htm#en_us_publink100033716You can make contributions to a Roth IRA for a year at any time during the year or by the due date of your return for that year (not including extensions).
| You can make contributions for 2008 by the due date (not including extensions) for filing your 2008 tax return. |
taxmap/pub17/p17-093.htm#en_us_publink100033718A 6% excise tax applies to any excess contribution to a Roth IRA.
taxmap/pub17/p17-093.htm#en_us_publink100033719These are the contributions to your Roth IRAs for a year that equal the total of:
- Amounts contributed for the tax year to your Roth IRAs (other than amounts properly and timely rolled over from a Roth IRA or properly converted from a traditional IRA or rolled over from a qualified retirement plan, as described later) that are more than your contribution limit for the year, plus
- Any excess contributions for the preceding year, reduced by the total of:
- Any distributions out of your Roth IRAs for the year, plus
- Your contribution limit for the year minus your contributions to all your IRAs for the year.
For purposes of determining excess contributions, any contribution that is withdrawn on or before the due date (including extensions) for filing your tax return for the year is treated as an amount not contributed. This treatment applies only if any earnings on the contributions are also withdrawn. The earnings are considered to have been earned and received in the year the excess contribution was made.
taxmap/pub17/p17-093.htm#en_us_publink100033721If contributions to your Roth IRA for a year were more than the limit, you can apply the excess contribution in one year to a later year if the contributions for that later year are less than the maximum allowed for that year.
taxmap/pub17/p17-093.htm#en_us_publink100033722You may be able to convert amounts from either a traditional, SEP, or SIMPLE IRA into a Roth IRA. You may be able to roll amounts over from a qualified retirement plan to a Roth IRA. You may be able to recharacterize contributions made to one IRA as having been made directly to a different IRA. You can roll amounts over from a designated Roth account or from one Roth IRA to another Roth IRA.
taxmap/pub17/p17-093.htm#en_us_publink100033723You can convert a traditional IRA to a Roth IRA. The conversion is treated as a rollover, regardless of the conversion method used. Most of the rules for rollovers, described earlier under
Rollover From One IRA Into Another under
Traditional IRAs, apply to these rollovers. However, the 1-year waiting period does not apply.
You can convert amounts from a traditional IRA to a Roth IRA in any of the following ways.
- Rollover. You can receive a distribution from a traditional IRA and roll it over (contribute it) to a Roth IRA within 60 days after the distribution.
- Trustee-to-trustee transfer. You can direct the trustee of the traditional IRA to transfer an amount from the traditional IRA to the trustee of the Roth IRA.
- Same trustee transfer. If the trustee of the traditional IRA also maintains the Roth IRA, you can direct the trustee to transfer an amount from the traditional IRA to the Roth IRA.
Conversions made with the same trustee can be made by redesignating the traditional IRA as a Roth IRA, rather than opening a new account or issuing a new contract.
taxmap/pub17/p17-093.htm#en_us_publink100093006Prior to 2008, you could only roll over (convert) amounts from either a traditional, SEP, or SIMPLE IRA into a Roth IRA. Beginning in 2008, you can roll over into a Roth IRA all or part of an eligible rollover distribution you receive from your (or your deceased spouse's):
- Employer's qualified pension, profit-sharing or stock bonus plan,
- Annuity plan,
- Tax-sheltered annuity plan (section 403(b) plan), or
- Governmental deferred compensation plan (section 457 plan).
Any amount rolled over is subject to the same rules for converting a traditional IRA into a Roth IRA. Also, the rollover contribution must meet the rollover requirements that apply to the specific type of retirement plan.
You must include in your gross income distributions from a qualified retirement plan that you would have had to include in income if you had not rolled them over into a Roth IRA. You do not include in gross income any part of a distribution from a qualified retirement plan that is a return of contributions (after-tax contributions) to the plan that were taxable to you when paid.
 | If you must include any amount in your gross income, you may have to increase your withholding or make estimated tax payments. See Publication 505, Tax Withholding and Estimated Tax. |
For more information, see Rollover From Employer's Plan Into a Roth IRA in chapter 2 of Publication 590.
taxmap/pub17/p17-093.htm#en_us_publink100033726 However, you cannot convert any amount distributed from the SIMPLE IRA during the 2-year period beginning on the date you first participated in any SIMPLE IRA plan maintained by your employer.
taxmap/pub17/p17-093.htm#en_us_publink100033727For more detailed information on conversions, see Publication 590.
taxmap/pub17/p17-093.htm#en_us_publink100033728If, when you converted amounts from a traditional IRA or SIMPLE IRA into a Roth IRA or when you rolled over amounts from a qualified retirement plan into a Roth IRA, you expected to have modified AGI of less than $100,000 and a filing status other than married filing separately, but your expectations did not come true, you have made a failed conversion or failed rollover.
taxmap/pub17/p17-093.htm#en_us_publink100033729If the converted or rolled over amount (contribution) is not recharacterized (explained earlier), the contribution will be treated as a regular contribution to the Roth IRA and subject to the following tax consequences.
- A 6% excise tax per year will apply to any excess contribution not withdrawn from the Roth IRA.
- The distributions from the traditional IRA or qualified retirement plan must be included in your gross income.
- The 10% additional tax on early distributions may apply to any distribution.
You must move the amount converted or rolled over (including all earnings from the date of conversion or roll over) into a traditional IRA by the due date (including extensions) for your tax return for the year during which you made the conversion or roll over to the Roth IRA. You do not have to include this distribution (withdrawal) in income. See
Recharacterizations, earlier, for more information.
You can withdraw, tax free, all or part of the assets from one Roth IRA if you contribute them within 60 days to another Roth IRA. Most of the rules for rollovers, explained earlier under
Rollover From One IRA Into Another under
Traditional IRAs, apply to these rollovers.
A rollover from a designated Roth account can only be made to another designated Roth account or to a Roth IRA.
taxmap/pub17/p17-093.htm#en_us_publink100033732You do not include in your gross income qualified distributions or distributions that are a return of your regular contributions from your Roth IRA(s). You also do not include distributions from your Roth IRA that you roll over tax free into another Roth IRA. You may have to include part of other distributions in your income. See
Ordering rules for distributions, later.
A qualified distribution is any payment or distribution from your Roth IRA that meets the following requirements.
- It is made after the 5-year period beginning with the first taxable year for which a contribution was made to a Roth IRA set up for your benefit, and
- The payment or distribution is:
- Made on or after the date you reach age 591/2,
- Made because you are disabled,
- Made to a beneficiary or to your estate after your death, or
- To pay up to $10,000 (lifetime limit) of certain qualified first-time homebuyer amounts. See Publication 590 for more information.
If, within the 5-year period starting with the first day of your tax year in which you convert an amount from a traditional IRA or rollover an amount from a qualified retirement plan to a Roth IRA, you take a distribution from a Roth IRA, you may have to pay the 10% additional tax on early distributions. You generally must pay the 10% additional tax on any amount attributable to the part of the amount converted or rolled over (the conversion or rollover contribution) that you had to include in income. A separate 5-year period applies to each conversion and rollover. See
Ordering rules for distributions, later, to determine the amount, if any, of the distribution that is attributable to the part of the conversion or rollover contribution that you had to include in income.
Unless an exception applies, you must pay the 10% additional tax on the taxable part of any distributions that are not qualified distributions. See Publication 590 for more information.
taxmap/pub17/p17-093.htm#en_us_publink100033737If you receive a distribution from your Roth IRA that is not a qualified distribution, part of it may be taxable. There is a set order in which contributions (including conversion contributions and rollover contributions from qualified retirement plans) and earnings are considered to be distributed from your Roth IRA. Regular contributions are distributed first. See Publication 590 for more information.
taxmap/pub17/p17-093.htm#en_us_publink100033738You are not required to take distributions from your Roth IRA at any age. The minimum distribution rules that apply to traditional IRAs do not apply to Roth IRAs while the owner is alive. However, after the death of a Roth IRA owner, certain of the minimum distribution rules that apply to traditional IRAs also apply to Roth IRAs.
taxmap/pub17/p17-093.htm#en_us_publink100033739 For more detailed information on Roth IRAs, see Publication 590.
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