Criteria for Calculating Roth IRA Contributions
A Roth IRA is a popular type of individual retirement account (IRA). Unlike traditional IRAs, they are not funded by an employer, allowing you to contribute after-tax dollars and withdraw money without tax. Roth IRAs are often considered tax-advantaged, but there are strict contribution limits and regulations.
Every year, these contribution regulations are updated, so it’s important to learn how much you can fund your account. Let’s dive in!
Basic Roth IRA Contribution Limits in 2025
In 2025, the contribution limit for Roth IRA is $7,000 for those under the age of 50 and $8,000 for those above 50. The additional $1,000 is considered the catch-up for people above 50.
Keep in mind that these limits apply to the combined total of contributions made to all of your personal IRAs. For example, if you’re under the age of 50 and contribute $2,000 to your traditional IRA, you can’t contribute more than $5,000 to your Roth IRA that same year.
Modified Adjusted Gross Income (MAGI)
In addition to age, another important criterion for calculating Roth IRA contributions is your Modified Adjusted Gross Income, or MAGI. In simple words, MAGI is your adjusted gross income (AGI) after subtracting specific deductions, such as student loan interest or tuition.
The IRS uses MAGI to determine if you qualify for tax benefits. If your MAGI is too high, the IRS might limit how much you can contribute. To calculate your Roth IRA contribution limits, use an IRA contribution calculator. You can put in basic details about your income or status, and find out how much you can contribute to a Roth IRA.
The Importance of Filing Status
MAGI and filing status are interconnected contribution criteria. Here’s what the requirements for 2025 look like:
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Single Filers - A single filer with a MAGI of less than $150,000 can contribute the full amount to a Roth IRA. If it is between $150,000 and $165,000, the contribution limit will decrease. Lastly, if a single filer has a MAGI of more than $165,000, they are not eligible.
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Married Filing Jointly - If a married couple filing jointly has a MAGI of less than $236,000, they can make a full contribution. If it’s between $236,000 and $246,000, their contribution is reduced. If it's $246,000 or more, the couple cannot contribute.
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Married Filing Separately - To contribute separately despite being married, your MAGI must be under $10,000 to make a full contribution.
Always check the latest IRS guidelines to streamline the contribution process.
Earned Income
Lastly, be mindful of the earned income requirements. To contribute to a Roth IRA, you must have earned income in the year you wish to contribute. Sources can include:
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Salaries
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Wages
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Bonuses
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Tips
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Self-employment incomes
Keep in mind that not all income qualifies. For example, investment income, such as capital gains or dividends, doesn’t count. Always make sure your contributions comply with earned income requirements to avoid penalties or hurdles in the long run.
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