Why if we put money into a ROTH IRA, do we all of a sudden pay more federal taxes? Is this a bug?

[cjk43105]

My wife and I put the maximum amount allowed into new ROTH IRA accounts. It doesn't make any sense that we end up owing money on our federal taxes. I was owing $0.00 and after entering the $6500.00 that was contributed to the ROTH IRA, I owed $390.00 on federal taxes.  Is this a bug?

[VolvoGirl]

Maybe you weren't qualified to make a contribution.  Check your 1040 and see what happened.  If you have the Desktop program switch to Forms, Click Forms in the upper right and open the 1040 and schedules and look around.

[cjk43105]

You are absolutely correct.  Thank you so much.  Much appreciated.  

[DanaB · Accepted solution]

Please be aware that your Roth IRA contribution might be limited based on your filing status and income.  Please see 2018 - Amount of Roth IRA Contributions You Can Make for 2018 for more details. 

For 2018, your total contributions to all of your traditional and Roth IRAs cannot be more than:

• $5,500 ($6,500 if you’re age 50 or older), or
• your taxable compensation for the year, if your compensation was less than this dollar limit.

If you had excess contributions because of the limitation then excess contributions are taxed at 6% per year as long as the excess amounts remain in the IRA. To avoid the excess contributions tax:

• withdraw the excess contributions from your IRA by the due date of your individual income tax return (including extensions); and
• withdraw any income earned on the excess contribution.