Publication 590 - Individual Retirement Arrangements (IRAs)

Publication 590

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Generally, you can contribute to a Roth IRA if you have taxable compensation (defined later) and your modified AGI (defined later) is less than:

$177,000 for married filing jointly or qualifying widow(er),
$120,000 for single, head of household, or married filing separately and you did not live with your spouse at any time during the year, and
$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 5.

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Contributions can be made to your Roth IRA regardless of your age.

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You can contribute to a Roth IRA for your spouse provided the contributions satisfy the spousal IRA limit discussed in chapter 1 under How Much Can Be Contributed, you file jointly, and your modified AGI is less than $177,000.

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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, military differential pay, and taxable alimony and separate maintenance payments. For more information, see What Is Compensation? under Who Can Open a Traditional IRA? in chapter 1.

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Your modified AGI for Roth IRA purposes is your adjusted gross income (AGI) as shown on your return modified as follows.

Subtracting the following.
1. Roth IRA conversions included on Form 1040, line 15b; Form 1040A, line 11b; or Form 1040NR, line 16b. Conversions are discussed under Can You Move Amounts Into a Roth IRA, later.
2. Roth IRA rollovers from qualified retirement plans included on Form 1040, line 16b; Form 1040A, line 12b; or Form 1040NR, line 17b.
Add the following deductions and exclusions:
1. Traditional IRA deduction,
2. Student loan interest deduction,
3. Tuition and fees deduction,
4. Domestic production activities deduction,
5. Foreign earned income exclusion,
6. Foreign housing exclusion or deduction,
7. Exclusion of qualified bond interest shown on Form 8815, and
8. Exclusion of employer-provided adoption benefits shown on Form 8839.

You can use Worksheet 2-1 to figure your modified AGI.

Do not subtract conversion income when figuring your other AGI-based phaseouts and taxable income, such as your deduction for medical and dental expenses. Subtract them from AGI only for the purpose of figuring your modified AGI for Roth IRA purposes.

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The contribution limit for Roth IRAs generally depends on whether contributions are made only to Roth IRAs or to both traditional IRAs and Roth IRAs.

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Table 2-1. 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 $167,000	you can contribute up to $5,000 ($6,000 if you are age 50 or older) as explained under How Much Can Be Contributed.
	at least $167,000 but less than $177,000	the amount you can contribute is reduced as explained under Contribution limit reduced.
	$177,000 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 age 50 or older) as explained under How Much Can Be Contributed.
	more than zero (-0-) but less than $10,000	the amount you can contribute is reduced as explained under Contribution limit reduced.
	$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 $105,000	you can contribute up to $5,000 ($6,000 if you are age 50 or older) as explained under How Much Can Be Contributed.
	at least $105,000 but less than $120,000	the amount you can contribute is reduced as explained under Contribution limit reduced.
	$120,000 or more	you cannot contribute to a Roth IRA.

For 2011, the amounts in Table 2-1 increase. For 2011, your Roth IRA contribution limit is reduced (phased out) in the following situations.

Your filing status is married filing jointly or qualifying widow(er) and your modified AGI is at least $169,000. You cannot make a Roth IRA contribution if your modified AGI is $179,000 or more.
Your filing status is married filing separately, you lived with your spouse at any time during the year, and your modified AGI is more than -0-. You cannot make a Roth IRA contribution if your modified AGI is $10,000 or more.
Your filing status is different than either of those described above and your modified AGI is at least $107,000. You cannot make a Roth IRA contribution if your modified AGI is $122,000 or more.

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If contributions are made only to Roth IRAs, your contribution limit generally is the lesser of:

$5,000 ($6,000 if you are age 50 or older), or
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.

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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:

$5,000 ($6,000 if you are age 50 or older) minus all contributions (other than employer contributions under a SEP or SIMPLE IRA plan) for the year to all IRAs other than Roth IRAs, or
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.

Simplified employee pensions (SEPs) are discussed in Publication 560. Savings incentive match plans for employees (SIMPLEs) are discussed in chapter 3.

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You can repay qualified reservist, qualified disaster recovery assistance, and qualified recovery assistance distributions even if the repayments would cause your total contributions to the Roth IRA to be more than the general limit on contributions. However, the total repayments cannot be more than the amount of your distribution.

Note.If you make repayments of qualified reservist distributions to a Roth IRA, increase your basis in the Roth IRA by the amount of the repayment. If you make repayments of qualified disaster recovery assistance, or qualified recovery assistance distributions to a Roth IRA, the repayment is first considered to be a repayment of earnings. Any repayments of qualified disaster recovery assistance, or qualified recovery assistance distributions in excess of earnings will increase your basis in the Roth IRA by the amount of the repayment in excess of earnings. For more information, see Qualified reservist repayments under How Much Can Be Contributed? in chapter 1 and chapter 4, Disaster-Related Relief.

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If your modified AGI is above a certain amount, your contribution limit is gradually reduced. Use Table 2-1 to determine if this reduction applies to you.

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Worksheet 2-1. 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; Form 1040A, line 22; or Form 1040NR, line 37	1.
2.	Enter any income resulting from the conversion of an IRA (other than a Roth IRA) to a Roth IRA and a rollover from a qualified retirement plan to a Roth IRA	2.
3.	Subtract line 2 from line 1	3.
4.	Enter any traditional IRA deduction from Form 1040, line 32; Form 1040A, line 17; or Form 1040NR, line 32	4.
5.	Enter any student loan interest deduction from Form 1040, line 33; Form 1040A, line 18; or Form 1040NR, line 33	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, or Form 1040NR, line 34	7.
8.	Enter any foreign earned income exclusion 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 qualified savings bond interest from Form 8815, line 14	10.
11.	Enter any excluded employer-provided adoption benefits from Form 8839, line 26	11.
12.	Add the amounts on lines 3 through 11	12.
13.	Enter: $177,000 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, or $120,000 for all others	13.
	Is the amount on line 12 more than the amount on line 13? If yes, see the note below. If no, the amount on line 12 is your *modified adjusted gross income* 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. (If you receive social security benefits, use Worksheet 1 in Appendix B to refigure your AGI.) Then go to list item 2 under Modified AGI earlier or line 3 above in Worksheet 2-1 to refigure your modified AGI. If you do not have other income or loss items subject to AGI-based phaseouts, your modified adjusted gross income for Roth IRA purposes is the amount on line 12 above.

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If the amount you can contribute must be reduced, figure your reduced contribution limit as follows.

Start with your modified AGI.
Subtract from the amount in (1):
1. $167,000 if filing a joint return or qualifying widow(er),
2. $-0- if married filing a separate return, and you lived with your spouse at any time during the year, or
3. $105,000 for all other individuals.
Divide the result in (2) by $15,000 ($10,000 if filing a joint return, qualifying widow(er), or married filing a separate return and you lived with your spouse at any time during the year).
Multiply the maximum contribution limit (before reduction by this adjustment and before reduction for any contributions to traditional IRAs) by the result in (3).
Subtract the result in (4) from the maximum contribution limit before this reduction. The result is your reduced contribution limit.

You can use Worksheet 2-2 to figure the reduction.

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Worksheet 2-2. Determining Your Reduced Roth IRA Contribution Limit

Before using this worksheet, check Table 2-1 to determine whether or not your Roth IRA contribution limit is reduced. If it is, use this worksheet to determine how much it is reduced.

1.	Enter your modified AGI for Roth IRA purposes	1.
2.	Enter: $167,000 if filing a joint return or qualifying widow(er), $-0- if married filing a separate return and you lived with your spouse at any time in 2010, or $105,000 for all others	2.
3.	Subtract line 2 from line 1	3.
4.	Enter: $10,000 if filing a joint return or qualifying widow(er) or married filing a separate return and you lived with your spouse at any time during the year, or $15,000 for all others	4.
5.	Divide line 3 by line 4 and enter the result as a decimal (rounded to at least three places). If the result is 1.000 or more, enter 1.000	5.
6.	Enter the lesser of: $5,000 ($6,000 if you are age 50 or older), or Your taxable compensation	6.
7.	Multiply line 5 by line 6	7.
8.	Subtract line 7 from line 6. Round the result up to the nearest $10. If the result is less than $200, enter $200	8.
9.	Enter contributions for the year to other IRAs	9.
10.	Subtract line 9 from line 6	10.
11.	Enter the lesser of line 8 or line 10. This is your reduced Roth IRA contribution limit	11.

Round your reduced contribution limit up to the nearest $10. If your reduced contribution limit is more than $0, but less than $200, increase the limit to $200.

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Example.(p62)

You are a 45-year-old, single individual with taxable compensation of $113,000. You want to make the maximum allowable contribution to your Roth IRA for 2010. Your modified AGI for 2010 is $106,000. You have not contributed to any traditional IRA, so the maximum contribution limit before the modified AGI reduction is $5,000. Using the steps described earlier, you figure your reduced Roth IRA contribution of $4,670 as shown on the following worksheet.

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Worksheet 2-2. Example—Illustrated

Before using this worksheet, check Table 2-1 to determine whether or not your Roth IRA contribution limit is reduced. If it is, use this worksheet to determine how much it is reduced.

1.	Enter your modified AGI for Roth IRA purposes	1.	106,000
2.	Enter: $167,000 if filing a joint return or qualifying widow(er), $-0- if married filing a separate return and you lived with your spouse at any time in 2010, or $105,000 for all others	2.	105,000
3.	Subtract line 2 from line 1	3.	1,000
4.	Enter: $10,000 if filing a joint return or qualifying widow(er) or married filing a separate return and you lived with your spouse at any time during the year, or $15,000 for all others	4.	15,000
5.	Divide line 3 by line 4 and enter the result as a decimal (rounded to at least three places). If the result is 1.000 or more, enter 1.000	5.	.067
6.	Enter the lesser of: $5,000 ($6,000 if you are age 50 or older), or Your taxable compensation	6.	5,000
7.	Multiply line 5 by line 6	7.	335
8.	Subtract line 7 from line 6. Round the result up to the nearest $10. If the result is less than $200, enter $200	8.	4,670
9.	Enter contributions for the year to other IRAs	9.	0
10.	Subtract line 9 from line 6	10.	5,000
11.	Enter the lesser of line 8 or line 10. This is your reduced Roth IRA contribution limit	11.	4,670

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When Can You Make Contributions?

You 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 2010 by the due date (not including extensions) for filing your 2010 tax return. This means that most people can make contributions for 2010 by April 18, 2011.

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What If You Contribute Too Much?

A 6% excise tax applies to any excess contribution to a Roth IRA.

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These 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 (explained earlier under How Much Can Be Contributed?), plus
Any excess contributions for the preceding year, reduced by the total of:
1. Any distributions out of your Roth IRAs for the year, plus
2. Your contribution limit for the year minus your contributions to all your IRAs for the year.

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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 only applies if any earnings on the contributions are also withdrawn. The earnings are considered earned and received in the year the excess contribution was made.

If you timely filed your 2010 tax return without withdrawing a contribution that you made in 2010, you can still have the contribution returned to you within 6 months of the due date of your 2010 tax return, excluding extensions. If you do, file an amended return with "Filed pursuant to section 301.9100-2" written at the top. Report any related earnings on the amended return and include an explanation of the withdrawal. Make any other necessary changes on the amended return.

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If 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.

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Can You Contribute to
a Roth IRA?(p59)

Is there an age limit for contributions?(p59)

Can you contribute to a Roth IRA for your spouse?(p59)

Compensation.(p60)

Modified AGI.(p60)

How Much Can Be Contributed?(p60)

Table 2-1. Effect of Modified AGI on Roth IRA Contribution

Roth IRAs only.(p60)

Roth IRAs and traditional IRAs.(p60)

Repayment of reservist, disaster recovery assistance, and recovery assistance distributions.(p60)

Contribution limit reduced.(p60)

Worksheet 2-1. Modified Adjusted Gross Income for Roth IRA Purposes

Worksheet 2-2. Determining Your Reduced Roth IRA Contribution Limit

Example.(p62)

Worksheet 2-2. Example—Illustrated

When Can You Make Contributions?(p62)

What if You Contribute Too Much?(p62)

Excess contributions.(p62)

Applying excess contributions.(p62)

Can You Contribute to a Roth IRA?(p59)

Is there an age limit for contributions?(p59)

Can you contribute to a Roth IRA for your spouse?(p59)

Compensation.(p60)

Modified AGI.(p60)

How Much Can Be Contributed?(p60)

Table 2-1. Effect of Modified AGI on Roth IRA Contribution

Roth IRAs only.(p60)

Roth IRAs and traditional IRAs.(p60)

Repayment of reservist, disaster recovery assistance, and recovery assistance distributions.(p60)

Contribution limit reduced.(p60)

Worksheet 2-1. Modified Adjusted Gross Income for Roth IRA Purposes

Worksheet 2-2. Determining Your Reduced Roth IRA Contribution Limit

Example.(p62)

Worksheet 2-2. Example—Illustrated

When Can You Make Contributions?(p62)

What if You Contribute Too Much?(p62)

Excess contributions.(p62)

Applying excess contributions.(p62)

Can You Contribute to
a Roth IRA?(p59)