Roth IRA Contribution

Submitted by Brian Kuhn on Thu, 2016-04-28 20:58

Married self employed person makes 180k earned and 20k pension but does 30k SEP contribution. Is his income for Roth contribution 200k meaning he can’t do Roth IRA or 150k meaning he can? Thanks,



Submitted by Alan - IRA critic on Thu, 2016-04-28 21:48

Regular Roth contribution income phaseouts are based on modified AGI, not basic AGI. But if MAGI is 170,000 then both spouses can make full Roth IRA contributions. Note that while deductible TIRA contributions reduce MAGI, SEP contributions do not. Therefore the SEP contribution helps in reducing MAGI below the Roth income phaseout amount.

Submitted by David Mertz on Fri, 2016-04-29 11:35

  • “Note that while deductible TIRA contributions reduce MAGI, SEP contributions do not.”  Alan, I think you meant to say the opposite.  Your last sentence is correct though, a SEP IRA contribution results in a lower MAGI on which Roth contribution eligibility is based.
  • AGI will also be reduced by the deductible portion self-employment taxes.  With $180k of net profit from SE, the SE tax deduction will be about $9,750.  $180k of net profit from self-employment, $20k of taxable pension income and a $30k SEP IRA contribution results in a MAGI of about $160,250.
  • Married filing jointly, AGI (and therefore MAGI) includes both spouses’ incomes.
  • As Alan said, with 2016 MAGI being under $184,000, both spouses can make full Roth IRA contributions for 2016.   ($183,000 if we are talking about 2015 instead)

Submitted by Brian Kuhn on Fri, 2016-04-29 14:08

Thanks everyone as always

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