Clarification on Roth IRA - MAGI limit/tax year

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InertiaDriven71
Posts: 21
Joined: Sun Sep 06, 2015 9:22 am
Location: Monticello, AR

Clarification on Roth IRA - MAGI limit/tax year

Post by InertiaDriven71 »

Regarding the income limit applicable to whether you can contribute to your Roth IRA-- Does the income limit apply to the tax year you want to contribute? Or to the tax year prior to?

Perhaps I misunderstood my readings all these years, however I have always thought it applied to the tax year previous to contribution year. I suppose this is because of bonuses, or losing a job, or any other unexpected impact on income would make it hard to know your final MAGI early in a given year. However I agree this is an assumption, and never researched it closely as I have never been near the MAGI limit.

Now I am inquiring because my wife got a job, and our 2022 MAGI will indeed be over the limit, provided we both keep our current jobs next year. Previously, we contributed the max into each of our Roths in January of every year. Our 2021 MAGI is under the limit, and we already contributed our max to each Roth last January. Now trying to figure out if 2021 was out last year to contribute under our current situations.

Seems simple, however there was not an accessible or straightforward answer via Google search. Multiple comments are welcome


thanks in advance
tashnewbie
Posts: 4284
Joined: Thu Apr 23, 2020 12:44 pm

Re: Clarification on Roth IRA - MAGI limit/tax year

Post by tashnewbie »

It's the MAGI for the tax year for which you want to contribute, regardless of which calendar year that contribution is made.

So if you want to make a 2022 contribution in January 2022, what matters is the 2022 MAGI, not the 2021 or 2023 MAGI.

Some people make a contribution for the prior tax year in the subsequent calendar year (e.g., 2020 contribution in March 2021), but the relevant number is the MAGI for the tax year of the contribution.

IRS Pub 590-A might be helpful: link
fabdog
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Joined: Wed Jan 16, 2013 12:59 pm
Location: Williamsburg VA

Re: Clarification on Roth IRA - MAGI limit/tax year

Post by fabdog »

the contribution limit applies to the current year. so your 2021 Roth contributions (even if made thru Apr 2022) are governed by your 2021 MAGI.

Your 2022 MAGI governs what you can do for Roth 2022 contributions

Mike
Topic Author
InertiaDriven71
Posts: 21
Joined: Sun Sep 06, 2015 9:22 am
Location: Monticello, AR

Re: Clarification on Roth IRA - MAGI limit/tax year

Post by InertiaDriven71 »

Thank you both for the guidance!!!
houseofnine
Posts: 217
Joined: Sat Jan 11, 2020 3:40 pm

Re: Clarification on Roth IRA - MAGI limit/tax year

Post by houseofnine »

We are in a similar situation, as we received a one-time partnership distribution that will put us over the limit. We made our Roth contributions in January 2021, so now need to contact Etrade and take it back out. My understanding is that we will still owe tax on any gains accrued after the contribution. You may also look at how the IRS calculates MAGI specifically for Roth contribution eligibility.

https://www.irs.gov/publications/p590a# ... 1000230985
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