Roth IRA Contribution with both W2 and 1099-NEC

[MaryQG]

Hi!  My daughter made $4848 of W2 income and $671 of 1099-NEC income (from Instacart).  She paid $95 in self employment tax according to turbotax return.  Can she contribute $5424 ($4848 + $671 - $95) to her Roth IRA?  I think that is right but wanted to be sure and it's not obvious.

thanks,

Mary

[RayW7]

Yes, based on the information provided your daughter would qualify to contribute to a Roth IRA.  TurboTax will calculate this value for you.

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.

See IRS Publication 590-a

[dmertz]

Her maximum contribution would be $4,848 + $671 - $95 / 2) = $5,471.  Net earnings from self employment are net profit minus the deductible portion of SE taxes, not the entire amount of SE taxes.