ROTH IRA

[EGreene21]

What is the maximum gross income I can have, married filing jointly, to contribute to a Roth IRA? And what happens if I went over that max gross income, but there was a contribution to the Roth IRA? 

[bbaker11]

For tax year 2024, the maximum amount of income a joint filer can have and still contribute to a Roth IRA is $240,000.   Although note that your contribution amount is gradually phased out if your income rises between $230,000. and $240,000.  Please see the following link for more information:

https://turbotax.intuit.com/tax-tips/retirement/boost-your-retirement-savings/L3lryQHVz 

If you contribute to a Roth IRA and your income exceeds the above limit, then you’ll be subject to a 6% tax penalty.  Please see the following link for more information:

https://ttlc.intuit.com/turbotax-support/en-us/help-article/form-1099-r/happens-made-excess-roth-ira... 

[EGreene21]

Is that limit of $240,000 income before taxes or after taxes? 

[VolvoGirl]

It’s on your AGI.   See IRS Pub 590-A IRA Contributions page 38 for ROTH IRA 

https://www.irs.gov/pub/irs-pdf/p590a.pdf

[EGreene21]

Ok. but I don’t know what my final AGI is until I’m filing my taxes, which is after I’ve already contributed… I might find myself 

somewhat close to the limit (or at least at the range the contribution would have to taper off) so to keep an eye on it do I use my “Year to Date Net Pay” on my paycheck as guide to ensure I’m below the income limit  (bc the AGI would be further adjusted from that?)

[K M W]

Hi, EGreene21!  I agree, it would be difficult to estimate what your 2024 AGI will be while we are still in tax year 2024, especially if you think you are going to be close to or in the phase-out area for contributing to a Roth IRA.  However, the good news is that you don't have to estimate your AGI and guess on making a Roth contribution during calendar year 2023 - you actually have until the tax return filing deadline (not including extensions) to make a contribution to an IRA for the prior tax year.

So, what that means is this: You don't have to make a 2024 IRA contribution in calendar year 2024. You would prepare your tax return for 2024 in early 2025, when you have all your official tax reporting documents and other information to prepare the return.  After preparing your return, you will know exactly what your 2024 AGI is. You then technically have until the due date of the 2024 tax return, April 15, 2025 to make an IRA contribution for tax year 2024.  Just make sure you make the actual contribution by the due date of the return - and MAKE SURE you tell the IRA trustee that the contribution you are making is for tax year 2024, NOT tax year 2025.

You can use your current paycheck to get an idea of taxable income generated from that job, but do NOT use the net pay. The net pay is what you receive after deductions such as FICA taxes and certain employee benefit deductions which are NOT considered pre-tax amounts. Often paychecks will show an amount of "taxable wages" or "federal taxable wages" - this is the amount that for the full year, ultimately will be listed on your W2 for taxable wages, and this is the amount you want to review to see if your taxable wages are within that IRA contribution level.  Keep in mind that you will want to consider any other income you have for the year and how that other income will impact limitations on IRA contributions, so in the end it would be best to wait until early 2025 to make an IRA contribution for tax year 2024.

[VolvoGirl]

No do not use the Net Pay.  Use the Gross Pay to be safe.  Your AGI can be more than your pay.  It includes everything like 1099  interest and dividends.   Look at your 2022 return and see all the items you reported on it.  Look at your 2022 W2 and see if you can match box 1 to your pay.  There are several items that affect W2 box 1 so it can be hard to figure out box 1 if you have a lot of deductions.  Some deductions are pre-tax and some are included in box1.