Amount of Roth IRA Contribution vs. Income

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https://www.irs.gov/retirement-plans/plan-participant-employee/amount-of-roth-ira-contributions-that-you-can-make-for-2022

Just making an example (the numbers are not real):

If someone is single, and annual W2 income is $120k, and that is all his/her income source, then he/she is qualified to contribute $6000 to Roth account in 2022. However, he/she makes $200k short term capital gain from stock market in 2022, but he/she also has $300k capital loss carryover.

In this case, his/her total income in 2022 is $320k (120k+200k), and his/her capital loss carryover is $300k, is he/she qualified to make $6000 contribution to Roth directly?

Thanks.

Not A Product Question

dmertzAnswer

Level 15

VAer, you are correct. Being covered by an employer plan is only relevant to determining deductibility of a traditional IRA contribution. It has no effect on eligibility to contribute to a Roth IRA.

Mike9241

Level 15

assuming you are not covered by an employer retirement plan then yes because the ROTH limitation is based on modified adjusted gross income (MAGI)

your $200K of current year STCG is offset by the $300K CLCO but limited to capital gains for the year + $3K. so your return would show MAGI of $117K - the $120K in wages less the $3K in deductible capital losses.

Mike9241

VAerAuthor

Level 6

@Mike9241

Thanks for explanation of MAGI of $117K

But what has Roth to do with employer covered pension plan? I have employer sponsored pension plan (government employee), and I always made Roth contribution directly before.

What I knew is: With employer sponsored plan, traditional IRA contribution is not deductible(for certain income level), that is all. Nothing to do with Roth at all.

I thought Roth contribution is only related to income.

dmertzAnswer

Level 15

VAer, you are correct. Being covered by an employer plan is only relevant to determining deductibility of a traditional IRA contribution. It has no effect on eligibility to contribute to a Roth IRA.