Very down year for my business in 2017. About $12,000 in AGI, but will owe no taxes. Can I still make a Roth contribution for 2017 (and pay no tax on the contribution)?

[Critter]

OK... you are mixing up apples & oranges ...

First to make a contribution you must have earned income. Not sure what the $12K AGI you mentioned  is comprised of.

Next, if you qualify to make a ROTH contribution you cannot deduct it on the return. It cannot reduce your AGI.

And lastly ... if your income is low enough that the standard/itemized deduction & personal exemptions zeros out your income then you will pay no federal taxes. 

[doug8]

Thank you for the response.  Bit, what I was attempting to ask is whether I can have it both ways during this down year - no tax on Roth contribution AND post- contribution tax benefits of Roth.  I have enough earned income to make Roth contribution but won't owe income tax this year because of other deductions.  I understand Roth contribution is not deductible.

[VolvoGirl]

No tax on Roth contribution would be the opposite of it not being deductible. Since it is not deductible you will be paying tax on the income used to contribute to it.  So what do you mean by no tax on it?

Do you have a Traditional IRA you want to convert to  ROTH?

[Critter]

Again you are confused ... since you are using some of the $12K taxable income to make the ROTH contribution AND none of the $12K is taxable on your return  then in your way of thinking you are not paying tax on the ROTH contribution ...BUT it is  because none of your income is taxable due to your income being so low.   So due to your low income  ... none of your income is taxable AND post tax contributions (which is the definition of a ROTH contribution)... so in your way of thinking you are having your cake and eating it too.

[doug8]

I don't think I'm confusing anything.  I understand everything that has been said in response to my question.  I just think I'm not making my question clear.  I'm not looking for any tax benefit for 2017 by virtue of an IRA contribution.  My interest in the Roth contribution for 2017 is simply for the down the road tax benefits.  So, my question comes down to one thing -- eligibility to make the contribution.  If I have earned income in excess of the contribution that I intend to make (which is $6,500 -- I am 53), then am I eligible to make that contribution even though my taxable income will be drawn down this year to zero because of non IRA deductions?  In other words, is there some small print that says you can't make a Roth contribution in a year in which you would not otherwise owe any income tax because of non-IRA deductions.  The only reason I ask the question is that most IRA contribution decisions have to do with taxability or  non-taxability in the year of contribution.  Because of my low earned income this year, that is a non-issue, and it would seem that I could make the Roth contribution, and get all of those benefits, without having to consider the issue of being taxed on the contribution, simply because this is a rare year where my income will not produce any income tax owed.   I just want to make sure I'm not overlooking something.

[Critter]

Yes ... you are eligible... that was not in question... and there is no fine print you are missing.  You are looking for shadows that don't exist.  

Even if you only made $6500 then you could still make a contribution of $6500 even though you would not have any taxable income.

[doug8]

Excellent.  Thank you for the help.  Not the first time I've looked for shadows that don't exist.  : )

[TaxGuyBill]

As a possible tax-planning suggestion:  If you have negative taxable income and have any non-Roth retirement accounts, you could "convert" part of the non-Roth to a Roth account.  That will create taxable income, but you already have negative taxable income, it would effectively be a tax-free conversion.

[doug8]

Thanks for the suggestion.  Don't have non-Roth accounts, but the down year is helping to avoid capital gains tax on my home that I sold this year for a modest gain.  Had the house long enough for long-term characterization, but did not meet the 2 year holding period for zero tax (house sold much quicker than I expected and for more than I was asking, and buyer could not extend closing outside my two-year period), but capital gains plus ordinary income still not going to reach the first  long-term taxable capital gains bracket because of deductions against ordinary income.  Only tax should be some modest self employment tax.  Thanks for all of the help everybody.