Roth Eligibility
I’m single and 51 years old.
My W2 wages for 2012 will be $130,000.
If I contribute $22,500 to the company 401k plan, so that my AGI will be $107,500 ($130,000 – $22,500), will I be able to make a full Roth IRA contribution for 2012 [$6,000] since my AGI will be under the $110,000 – $125,000 contribution phase-out?
Permalink Submitted by Alan Spross on Sat, 2012-08-11 01:29
Yes, if your only income is the W-2 income.
The Roth IRA contribution limits are defined by modified AGI (MAGI). This income includes other income besides wages, such as interest, dividends, pensions, cap gains, business income etc.
To determine MAGI, take your Form 1040 tax return AGI and add back:
1) TIRA deductions
2) Foreign earned income and housing exclusions
3) Student loan interest deduction
4) Tuition and fees deduction
5) Qualified bond interest
6) Employer adoption benefits
7) Domestic production activities deduction
Subtract out Roth conversions and qualified Roth rollovers.
Also note that your 401k deductions must be to the pre tax 401k account, not the Roth 401k option.
Permalink Submitted by Robert Wright on Sat, 2012-08-11 12:18
Thanks Alan.
Permalink Submitted by Robert Wright on Sat, 2012-08-11 21:35
Alan,
Would the same be true if the circumstances were a self-employed individual and the $130,000 was Schedule C income [line 12 on the 1040] and the $22,500 was a SEP IRA contribution?
In other words, does the requirement to “Add Back” traditional IRA deductions include SEP IRA contributions or do only TIRA deductions of $6,000 (for individuals 50 and older) or less get added back to AGI to calculate MAGI?
It appears from the Pub 590 instructions that SEP IRA contributions would not be added back to calculate MAGI since they are on line 28 of the 1040.
TIRA contributions are on line 32 of the 1040 and the Pub 590 instructions (page 56, Worksheet 2-1) say to add TIRA contributions from line 32 of the 1040.
Thanks again.
Permalink Submitted by Alan Spross on Sat, 2012-08-11 23:08
SEP IRA contributions do NOT get added back to determine MAGI for Roth contribution purposes.
Permalink Submitted by Robert Wright on Sat, 2012-08-11 23:42
Thanks again.