If you have not yet funded your Roth account for 2015, it is not too late!
Between January 1 and April 15 and before you file your taxes you have the opportunity to fund your Roth IRA or Traditional IRA up to the limit. Here are the opportunities available to you, depending on how much taxable income you have:
2015 Roth IRA Funding
You are allowed to contribute to your Roth IRA between January 1, 2015 and April 15, 2016, or whenever you file your 2015 taxes (whichever is earlier).
Since Roth IRAs are so powerful, there are limitations for contributing. If you are under age 50 and you and/or your spouse have earned income for 2015, you are allowed to contribute $5,500 in after-tax dollars to your Roth. If you are over age 50, you can contribute $6,500. However, there are income limits.
If you are married and file taxes jointly, you can contribute the full amount if you jointly make less than $183,000. If you make between $183,00 and $193,000, you can contribute a reduced amount, which you can calculate by referring to IRS Publication 590-A. If you make $193,000 or more, skip down to the section on Backdoor Roth funding.
If you are single, you can contribute the full amount if you make less than $116,000. A reduced contribution is allowed if you make between $116,000 and $131,000, and above $131,000 skip down to the Backdoor Roth funding section.
2016 Roth IRA Funding
You are allowed to contribute up to the limit any time before April 15, 2017 or whenever you file your 2016 taxes.
The income limits have been slightly adjusted, and while the contribution limits are still $5,500 for those under age 50 and $6,500 for those above 50, the income limits have been increased by $1,000 each.
This means for married filing jointly, the full contribution is allowed if you together made less than $184,000, and the phase-out finishes at $194,000. For those filing as single, the limit is $117,000 and finishes phasing out at $132,000.
2015 Backdoor Roth IRA Funding
If you cannot contribute to your Roth IRA normally because your Adjusted Gross Income is above the limit, there is a workaround to get money into your Roth IRA.
First, make sure you do not have any Traditional IRAs with pre-tax dollars. Money in a 401(k) or 403(b) sponsored by an employer does not count against you – only money in a personal Traditional IRA.
Then, you can make a non-deductible contribution of $5,500 (or $6,500 if you are over age 50) to an empty non-deductible Traditional IRA. Once that money settles, you can convert those funds into a Roth IRA. Effectively, this puts after-tax dollars into your Roth IRA. Just be sure on your taxes to note that your Traditional IRA contribution is non-deductible.
We have written about the backdoor Roth process in more detail elsewhere, if you want more information on the process.
2016 Roth IRA Funding
After making a non-deductible contribution to your Traditional IRA and converting to a Roth IRA for 2015, you can repeat the process for 2016.
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