Contributing to a Roth IRA is a smart money move, especially if you anticipate making more money in the future. There are, however, contribution limits and income restrictions that must be considered before contributing to a Roth IRA.
The three major areas that will determine your eligibility to contribute to a Roth IRA include:
- Tax Filing Status
- Income Level
- Your Age
2012 Roth IRA Contribution Limits
Let’s look at the general limit for contributing to an IRA in 2012.
- $5,000 if you’re under 50
- $6,000 if you’re over 50
The IRS allows you to contribute $1,000 more to a Roth IRA if you are over 50 years of age. This is called the ‘catch up’ provision. The Roth IRA catch up remained the same for 2012.
2012 Roth IRA Income Limits
You can max out your Roth IRA as long as you fall within the income limits set by the IRS. For 2012, the Roth IRA income limits are as follows:
- Married Filing Jointly: $173,000
- Single Head of Household: $110,000
The Roth IRA income limits increased from 2011, so make sure you consider maxing out your account if you fall in this income level.
2012 Roth IRA Phase-out
If you make more than the amounts listed above, you can still contribute to a Roth, but it will be phased out according to your income. See your tax preparer for exactly how much you’re able to contribute if you fall in the following income group:
- Married Filing Jointly: $173,000 – $183,000
- Single Head of Household: $110,000 – $125,000
Are you planning on contributing to a Roth IRA this year?