This is a question asked by many people that are thinking about opening up their first retirement account, or possibly thinking about transferring from a Traditional IRA. If you are unsure on which to choose, try reading our post on Traditional vs Roth IRAs. If you have already decided on a Roth IRA and just need to know if you meet the qualifications, keep reading.
The first thing you need to know is whether you have taxable income coming in during the current tax year. To open a Roth IRA you must have some sort of employment resulting in taxable income whether that’s working for yourself, or for someone else. Basically if you’re paying taxes on it, it’s probably covered, but we’ll cover what’s not eligible below. The next thing you need to think about is whether that income falls between the income requirements.
Those limits are:
- $144,000 for singles filing as an individual, people that are married, but filing separate, or filing as the head of the household.
- $100,000 for people that are married, files separately, but has lived with their partner during the current year.
- $166,000 for people that are married and file jointly.
Things that aren’t covered as eligible compensation:
- Money made from dividends or interest.
- Profits made from rental properties.
- Any other money or compensation that isn’t considered income.
Roth IRAs don’t have any age requirements like a Traditional IRA so you can contribute at any age. Also, the time of the year doesn’t make a difference as long as it’s before your tax return comes due. One other thing that I haven’t covered is the fact that you have to be an American citizen to qualify.
Now that you know some of requirements, here’s a video that should help tie up any loose ends.
Speaking with your accountant is always advised, and they should know right away whether you qualify for a Roth IRA or not. Retirement accounts are always changing so even if you get one started, it’s best to keep in touch with your accountant to stay up-to-date on any changes that affect your account and to re-evaluate which approach will continue to make you the most money.
Please visit these pages if you are in need of a Roth IRA Calculator, or a Roth IRA Conversion Calculator.
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