Roth IRA Contribution Limit Worksheet

[user17737056739]

When AGI in phase-out range, the Worksheet creates a percentage of earned income that can be contributed. Don’t IRS rules impose a percentage of the contribution limit (up to earned income amount) that can be contributed when in the phase-out AGI range, not a percentage of earned income?

The relevant line of the Worksheet is 13, which specifies a percentage of the lesser of line 7 (earned income) or line 8 (maximum contribution amount) as shown on line 11 according to the percent in line 4, to determine the maximum contribution amount. If earned income is less than maximum contribution amount the Worksheet determines the phase-out contribution amount based on a percent of earned income.

Is this correct, that IRS rules limit a Roth contribution to a percentage of earned income when in the phase-out range, even if it is less than a percent of the contribution amount or phased-out contribution amount, as determined using the IRS worksheet and several online phase-out contribution calculators?

[DavidD66]

The combined maximum contribution is calculated on lines 1 through 6 of the worksheet.  It's a pretty simple calculation.  If you're married filing joint it is your (MAGI - $236,000) divided by $10,000 = percentage reduction.

The lower part that you are referring to is a calculation of how much of the maximum contribution each spouse can make based on their individual income.  

[user17737056739]

The TurboTax Worksheet calculates and limits the contribution to a percent of earnings even if the taxpayer is single. My understanding of IRS rules is that a taxpayer in the phase-out AGI range is limited to a percent of overall contribution amount, not earnings. The net effect of the Worksheet calculation for a single taxpayer when the earnings are less than the reduced contribution amount is to limit the contribution to a percent of earnings. Is that correct under IRS rules?

[dmertz · Accepted solution]

TurboTax is performing the same calculation as is done on Worksheet 2-2 of IRS Pub 590-A.

I had to go back and read Sections 408A and 219 of the tax code to confirm this, but if your supporting compensation is less than the overall Roth IRA contribution limit, it is indeed correct that your contribution limit is based on a proportion of compensation rather than a proportion of the overall contribution limit.  See line 6 of Worksheet 2-2:

https://www.irs.gov/publications/p590a#en_US_2025_publink1000231016