How Much Can I Contribute To A Roth IRA If I Earn Too Much?

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How Much Can I Contribute To A Roth IRA If I Earn Too Much?

I’m on the borderline for being able to contribute to a Roth IRA. I understand my ability to contribute is gradually phased out.

How do I determine how much I can contribute?

– Tax Broke in Philadelphia

For 2015, your ability to contribute to a Roth IRA begins to phase out for married couples filing jointly at an adjusted gross income of $183,000 and is completely phased out at $193,000. For single filers, the phase out happens between $116,000 and $131,000.

The calculation for the modified adjusted gross income used for Roth IRA contributions can be found in IRS Publication 590-A in Worksheet 2-1.

The calculation begins with the adjusted gross income from your tax return. It subtracts any income which is the result of a Roth conversion. Then it adds back in a number of deductions which you may or may not have taken. Once you have done your taxes these amounts will be clear because Worksheet 2-1 details the exact form and line where you can find each deduction that you have to add back in.

After determining your exact modified adjusted gross income, the rest is simply a prorated calculation of how far you are through the phase out amounts. For example:

If you are over 50 and your modified adjusted gross income married filing jointly is $188,000 (exactly half way through the phase out range), then you would be able to contribute exactly half of the $6,500 you would normally be able to contribute for 2015: $3,250.

If your modified adjusted gross income is $184,000, you would be just 10% into the phase out range and you would be able to contribute 90% of the normal value: $5,850.

In general, the formula of how much you can contribute is equal to: ((Top of the phase out range – modified AGI) / (Top of the phase out range – bottom of the phase out range)) * (Maximum you would normally be able to contribute).

When you are over the limits for contributing to a Roth IRA, you may be able to continue to fund your Roth IRA by using a technique called a “backdoor Roth contribution.” It takes some extra steps, but it makes sure you fully fund your Roth even if you pass the phase out limits.

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David John Marotta is the Founder and President of Marotta Wealth Management. He played for the State Department chess team at age 11, graduated from Stanford, taught Computer and Information Science, and still loves math and strategy games. In addition to his financial writing, David is a co-author of The Haunting of Bob Cratchit.