Thanks for your input, but I don't see how it is clear. There are exceptions noted like nontaxable combat pay. Traditional IRAs also have the same language surrounding taxable compensation. Publication 590-A says, "You can open and make contributions to a traditional IRA if you (or, if you file a joint return, your spouse) received taxable compensation during the year." Yet, difficulty of care payments count for nondeductible contributions towards them.
Publication 590-A says, "you may be able to establish and make nondeductible contributions to an individual retirement plan called a Roth IRA". It also says, "A 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". With regard to compensation, it says, "Generally, you can contribute to a Roth IRA if you have taxable compensation (defined later)", and the compensation section points back to chapter 1 ("For more information, see What Is Compensation under Who Can Open a Traditional IRA? in chapter 1.").
Again, Section 116 of the SECURE Act was supposed to treat difficulty of care payments as compensation ("SEC. 116. Treating excluded difficulty of care payments as compensation for determining retirement contribution limitations. "). Perhaps the way it was enacted did not do so for Roth IRAs.
In my opinion, it is not clear that Roth IRAs are treated differently from Traditional IRAs in this regard, and the IRS should make this clearer. However, for now, it seems it would be best not to assume they also count for Roth IRAs.
@DaveF1006 @PaulD CPA
