Roth IRA -Self employed for 60+

[charleee]

I am filing married jointly taxes, me and my spouse both are 60+, we both have 1099 NEC one for each + schedule K1, can we both contribute to Roth IRA. ? if yes how much. I am assuming it should be max. 5000 for each??  note :  my (schedule C net (6000)) - (schedule1 line 15 (1000))  =  5000 

[MinhT1]

From your information, I assume the following:

1. You are both self-employed.
2. You aren't employees, and therefore aren't covered by a retirement plan at work
3. As a couple, your Modified adjusted gross income (MAGI) is less than $218,000

For tax year 2023,  you can each contribute up to $7,500 to a Roth IRA ($6,500 + a catch-up of $1,000 as you are over 50).

See this IRS document.

[charleee]

yes, your assumption is correct.  so for this one i do not need to see my 1040 or NEC income? i mean let's say we both have 6000$ on my NEC still we both can contribute 7500? (6500 roth +catch up)? 

[Opus 17]

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@charleee wrote:

yes, your assumption is correct.  so for this one i do not need to see my 1040 or NEC income? i mean let's say we both have 6000$ on my NEC still we both can contribute 7500? (6500 roth +catch up)? 

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The expert missed the issue of compensation.  You can only make IRA contributions up to the personal limit, or up to the amount of your compensation from working, whichever is less.  Compensation is W-2 wages plus 92% of net self-employment reported on schedule C (your net profit minus the deductible portion of self-employment tax). 

You say that you have compensation of $5000 on schedule C, but you also mentioned your spouse has schedule C income and you also have K-1 income?  If you have a K-1 from an S-corp (1120-S) that is not compensation for working because that is passive business profits.  If you worked for the S-corp, you should have gotten a W-2 for your wages.  If you have a K-1 from a 1065 partnership, your compensation is reported on line 14.

If you are filing jointly, you can use the spousal IRA rules to divide your IRA contributions any way you like, but they can't be more than your combined compensation.   For example, if you and your spouse each have $5000 of compensation, you could contribute $5000 each to your Roth IRAs, or you could contribute $7500 and your spouse contribute $2500, or you could divide it any other way, but your total IRA contributions can't be more than your total compensation. 

[Opus 17]

It is true that the age limit for making IRA contributions was removed.  You can make contributions at any age, even after official "retirement", but you must still have compensation.