Q: I have a retirement plan at work and earn too much to use the traditional IRA deduction, so I’m hoping to contribute to a Roth IRA this year. The income limit for a Roth contribution is $193,000 for married couples filing jointly in 2019, so if my spouse and I earn a combined salary of $200,000, does this mean I can’t contribute?
Not necessarily. There are a few things you need to know here.
First, the Roth contribution limits are based on modified adjusted gross income, or MAGI. This means that certain items can be deducted from your gross income. For example, any traditional 401(k) contributions you made through payroll deduction are not included. The IRS provides a Roth-specific MAGI worksheet you can use, but the point is that just because your salary is over the limit doesn’t mean your MAGI is.
Next, it’s important to point out that the $193,000 income limit isn’t the absolute income limit. Rather, it’s the threshold above which the ability to contribute to a Roth IRA begins to phase out. The ability to contribute to a Roth IRA doesn’t disappear entirely for married couples until MAGI exceeds $203,000. Between those two thresholds, you can still make a partial contribution.
Finally, these are the limits to contribute directly to a Roth IRA. There’s no income limit whatsoever to contribute to a traditional IRA and then convert the account to a Roth IRA — a process known as the “backdoor” method of contributing to a Roth IRA (Note: If you have existing traditional IRAs, check with a tax advisor before doing this.)
In short, your income shouldn’t get in the way of making a Roth IRA contribution this year if that’s what you choose to do.