miscalculated Roth IRA contribution limit?

dvs · ‎July 13, 2020

Hi -- I might have checked a wrong box somewhere and it's probably too late now since I just filed, but I'm wondering if my Roth IRA contribution limit was miscalculated by TurboTax. It looks like passive income I received from a rental property was counted toward my total income. I'm using the formula for calculating in the contribution limit in this link (https://www.investopedia.com/roth-ira-calculator-2019-contribu[product key removed]32), and it matches what TurboTax says was my max contribution for 2019 (I even had to remove excess contributions). But, upon further review, it appears to be the case that TurboTax is counting passive income from my rental property as earned income that counts toward my earning limits on the Roth IRA. Is this an error on TurboTax? Did I make a mistake elsewhere that made TurboTax think the rental property should be counted as actively earned income? Or, am I just wrong about how passively earned income from rent counts toward the income limits on a Roth IRA? Thanks!

SusanY1 · ‎July 13, 2020

Contributions for Roth IRAs are not based on earned income, but on Modified Adjusted Gross Income (MAGI), which does include certain items of passive income.

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dvs · ‎July 13, 2020

Thanks! I think I was confusing things with how rental income doesn't count as compensation (https://www.irs.gov/publications/p590a) and MAGI. So, if 100% of my MAGI was based on rental income, I would not be eligible to contribute to my Roth IRA. But, if the rental income takes my MAGI above the income limits, then that still counts. I think I might still be missing something, but getting slightly closer I suppose...

miscalculated Roth IRA contribution limit?

Retirement tax questions

Retirement tax questions