Earned income less than limit, but TurboTax saying I over contributed to Roth IRA

[burkes55]

I'm married filing jointly. My wife and I both contributed the max amount to our Roth IRAs in 2024. TurboTax is saying we over contributed. Our W-2 income is below the limit so I'm not sure where the issue is coming from.

When I look at the filling materials, it appears Turbotax is adding in interest and dividend income into our AGI and basing the over contribution on that higher amount. But isn't a Roth IRA contribution only based on W-2 income?

[KrisD15]

You must have earnings for the amount of the contributions, but the limit is based on Modified Adjusted Gross Income which does include investment income. 

HERE is a link with more details.

[dmertz]

" it appears Turbotax is adding in interest and dividend income into our AGI and basing the over contribution on that higher amount."

TurboTax is behaving correctly.  AGI includes interest and dividends.  MAGI for this purpose is not permitted to exclude any income from AGI other than the taxable amount of taxable conversions or rollovers to a Roth IRA.  MAGI is not just W-2 income.

It seems that you have indeed made excess Roth IRA contributions.

[burkes55]

So I need earned income to contribute to a Roth IRA, but the amount I can contribute depends on my MAGI?

[MayaD]

That's Correct. To contribute to a Roth IRA, you must have compensation (i.e. wages, salary, tips, professional fees, bonuses) and your modified adjusted gross income (MAGI) must fall within the IRS's annual limits.