Excess Roth IRA contribution

[desert crawler]

My wife had 10K in earned income, and 4K in net income from her business. When we try to record our 7K contribution (for each of us) to the Roth IRA, it says my spousal IRA amount was too much (by 4K).  Am I wrong in thinking that Schedule C reported self employment income (reported on 1099)  is part of income you can use to fund an IRA? Or is turbotax calculation of the limit incorrect? 

[macuser_22]

If that is the total income then you forgot to subtract the deductible part (half of the 15.3% SE tax from the net self-employed income).  $4K * .15 / 2 = $300 that cannot be used for IRA contributions.

The most you can contribute to all of your traditional and Roth IRAs is the smaller of:

For 2018, $5,500, or $6,500 if you’re age 50 or older by the end of the year; or
your taxable compensation for the year.
For 2019, $6,000, or $7,000 if you’re age 50 or older by the end of the year; or
your taxable compensation for the year.

(Taxable compensation is generally wages that you worked for - W-2 or net self-employed income minus the deducible part of the SE tax, but can include commissions, alimony and separate maintenance, and nontaxable combat pay ).

See IRS Pub 590A "What is compensation" for details:
https://www.irs.gov/publications/p590a#en_US_2018_publink1000230355

See this IRS article for Roth contribution limits:

https://www.irs.gov/retirement-plans/roth-iras