Did something change in 2023 ROTH IRA contribution limit?
Hello:
My wife and I are both retired. One of us have an earned income of about 11000. Other one has social security. We are using HR Block software. Software is allowing both of us to contribute 7500 to ROTH IRA. Am I missing something? I thought you need an earned income for this to be valid. I also expected only one of our incomes to be eligible for ROTH IRA eligibility (the one with earned income). Kindly clarify. Until last year, before claiming social security, the earned income from one of the spouses allowed us to contribute to ROTH, albeit a slighter smaller amount than the max allowed.
Thanks
Permalink Submitted by PaulC on Mon, 2024-03-18 18:45
You are correct that Social Security income does not count as as earned income for purposes of eligibility for contributing to an IRA. When filing a joint tax return, the earned income of either spouse is considered. For example, if one spouse had earned income of $15,000 and the other spouse had no earned income, both spouses would be eligible to contribution $7,500 to their respective IRAs. The overall combined amount of earned income is what’s important. It could be in whatever combination between the spouses.
In your case, if one spouse has earned income of $11,000 then that should be the combined limit for IRA contributions. One could do the full $7,500 leaving only $3,500 eligible to be contributed by the other. Or both could contribute $5,500. Whatever combined amount as long as it doesn’t exceed the $11,000. There’s no other earned income, such as from self-employment?
I don’t know what’s going on the Block software. I’m guessing it may not be telling you what you think it is. Try entering a completed $7,500 Roth contribution for one of you and see if it still shows full $7,500 eligibility for the other.
Permalink Submitted by Ram Iyer on Mon, 2024-03-18 18:54
The earned income I mentioned is from self-employment. It could be a software glitch. But what you say makes sense.
Thanks
Permalink Submitted by Ram Iyer on Mon, 2024-03-18 19:04
Retirement planning, an update. As you suggested, when I put 7500 for one, it limited the amount for the second one. Still a little glitch. If I don’t put anything, it says 7500 allowed. Maybe, it meant “up to” 7500 allowed. Who knows. But problem is solved since it won’t allow more than the stipulated contribution.
Thanks