Should I contribute to a ROTH IRA?

The answer is “YES” if:

  • You are in the lower tax brackets such as the 15% tax rate.
  • You expect to be in a higher tax rate when you pull the money out.
  • Your child works in your business and you want to fund your child’s college education.
  • You do not want to have to take Required Minimum Distributions out after age 70.5 and you have negative taxable income due to a business loss.

Are you eligible to contribute to a Roth IRA?  You will want to call Jeff Brooks at 602-292-2009 to discuss or review IRS Publication 590 Table of Contents and find the Roth IRA section.

Per the IRS Publication 590

  • http://www.irs.gov/publications/p590/ch02.html: Modified AGI limit for Roth IRA contributions increased. For 2011, your Roth IRA contribution limit is reduced (phased out) in the following situations.
  • Your filing status is married filing jointly or qualifying widow(er) and your modified AGI is at least $169,000. You cannot make a Roth IRA contribution if your modified AGI is $179,000 or more.
  • Your filing status is single, head of household, or married filing separately and you did not live with your spouse at any time in 2011 and your modified AGI is at least $107,000. You cannot make a Roth IRA contribution if your modified AGI is $122,000 or more.
  • Your filing status is married filing separately, you lived with your spouse at any time during the year, and your modified AGI is more than -0-. You cannot make a Roth IRA contribution if your modified AGI is $10,000 or more.

Table 2-1. Effect of Modified AGI on Roth IRA Contribution

This table shows whether your contribution to a Roth IRA is affected by the amount of your modified adjusted gross income (modified AGI).

IF you have taxable compensation
and your filing status is …

AND your modified AGI is …

THEN …

married filing jointly or
qualifying widow(er)

less than $167,000

you can contribute up to $5,000 ($6,000 if you are age 50 or older) as explained under How Much Can Be Contributed .

at least $167,000
but less than $177,000

the amount you can contribute is reduced as explained under Contribution limit reduced .

$177,000 or more

you cannot contribute to a Roth IRA.

married filing separately and
you lived with your spouse at any
time during the year

zero (-0-)

you can contribute up to $5,000 ($6,000 if you are age 50 or older) as explained under How Much Can Be Contributed .

more than zero (-0-)
but less than $10,000

the amount you can contribute is reduced as explained under Contribution limit reduced .

$10,000 or more

you cannot contribute to a Roth IRA.

single,
head of household,
or married filing separately and
you did not live with your spouse
at any time during the year

less than $105,000

you can contribute up to $5,000 ($6,000 if you are age 50 or older) as explained under How Much Can Be Contributed .

at least $105,000
but less than $120,000

the amount you can contribute is reduced as explained under Contribution limit reduced .

$120,000 or more

you cannot contribute to a Roth IRA.

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About Jeffrey Brooks

Jeffrey Brooks, CPA, CFP, MBA since 1976 has specialized in helping clients save significant taxes, help businesses increase their cash flow, revenues and profits while increasing their control and satisfaction. Jeff and his accounting firm sincerely cares about the happiness of his clients.

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JBrooks Wealth Advisors, PC.

Certified Public Accountant
Address: 4647 N 32nd Street, Suite B245
Phoenix, Arizona 85018
Phone: 602-292-2009
Email: jeff@jbrookswa.com