Where can I see if I'm eligible to contribute to Roth IRA account?

[mwalker442]

In reading the IRS document, I thought pension income was not counted in MAGI.  Turbo tax says I have an excess contribution?

[BillM223]

Only earned income can be used to calculate the Roth IRA contribution limit. This is why the word "compensation" is used above, because compensation (wages for working) is considered earned income.

On the other hand, pension income is not considered earned income or compensation. In this case, if the only income is pension income, the Roth IRA contribution limit would be zero (possibly leading to an excess contribution).

Please see this IRS page on 2019 Roth IRA limits for more information.

[mwalker442]

Turbo tax is including my taxable pension amount - 2018- 1040- LINE 4b in my modified AGI for Roth contributions. My W-2 income is about $2900.00, but when it includes my pension, it puts me above the threshold for contributing??

[GiseleD]

It sounds like your pension is putting you over the Modified Adjusted Gross Income (MAGI) threshold for ROTH IRA contributions. MAGI for Roth IRA purposes is AGI minus conversion income (any income resulting from a conversion or rollover from a qualified retirement plan to a Roth IRA, if applicable).

Below are the 2019 thresholds, along with their phaseouts:

MFJ, QW............ $193,000 to $ 203,000

Single, HOH........ $122,000 to $ 137,000

MFS................... $ 0 to $ 10,000

You can find more detail on this in Internal Revenue Code, or you can visit IRS Publication 590-A (pp. 39-40) to determine your MAGI. Note, the IRS has not released the 2019 publication yet; this is the 2018 version.

[mwalker442]

Thanks for the input, but I'm still a bit confused.  In the first response, Bill stated if my pension was my only income, then my Roth contribution would be 0 because I have no "earned income" as pension income is not "compensation". Then you state my pension income is putting me over the limit for contributions, as my MAGI for Roth is AGI minus conversion income. Shoul dnot my MAGI for Roth be AGI minus pension income also, since it's not considered "compensation"? Without my pension, my MAGI for Roth would be about 17,000.

Mike

[Irene2805]

It's true that your pension is not considered "earned income."  [This would affect certain credits like the earned income credit.]  However, your pension IS considered taxable income, included in your gross income, AGI, and MAGI.  You need to have taxable income in order to contribute to a Roth IRA

You can contribute to a Roth IRA if you have taxable income and your MAGI is less than the amounts listed below.  For 2019 and 2020, your total contributions to all of your traditional and Roth IRAs cannot be more than: $6,000 ($7,000 if you're age 50 or older), or. your taxable income for the year, if your income was less than this dollar limit.

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 $193,000. You can’t make a Roth IRA contribution if your modified AGI is $203,000 or more.
• Your filing status is single, head of household, or married filing separately and you didn’t live with your spouse at any time in 2019 and your modified AGI is at least $122,000. You can’t make a Roth IRA contribution if your modified AGI is $137,000 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 zero. You can’t make a Roth IRA contribution if your modified AGI is $10,000 or more.

If you would like to calculate your MAGI, you can use the worksheet listed on p. 40 of IRS Pub. 590-A Contributions to Individual Retirement Arrangements (IRAs)

For more information, you can click on this link for a TurboTax article:   What Is the Difference Between AGI and MAGI on Your Taxes?

[hon]

At the completion of Turbotax Federal Review for 2019,  it says "You can still contribute up to $12,000 to an IRA"

Query:

Is $12,000 referring to individual or combined contribution ?

How much can myself / my spouse each contribute to an IRA / Roth IRA for 2019 ?

My Filing Status " Married Filing Jointly"