Ask the Expert: What's the income limit for Roth IRAs?
I'm retired, living on Social Security and retirement investments. But I also earn about $6,500 a year as a consultant. Can I contribute that $6,500 of earned income to a Roth IRA?
There's no age limit for contributing to a Roth individual retirement account, but there are two income requirements. One is a limit on your total income. The other is a limit on the amount of self-employment income that counts as earnings.
For single taxpayers, 2022 Roth contribution eligibility phases out if your total income (including investment income) is between $129,000 and $144,000: If your total 2022 income is under $129,000, you can make the maximum allowable 2022 Roth contribution — and if your total 2022 income is over $144,000, you can't make a Roth contribution. For married couples filing jointly, eligibility phases out between $204,000 and $214,000 of total income.
Let's say based on your total income, you can make the maximum Roth contribution. That's $6,000 ($7,000 if you're 50 or older) or your 2022 earned income, whichever is smaller.
You made $6,500 as a self-employed consultant. But there's a limit on the amount of self-employment income that counts as earnings for a Roth contribution, says Ed Slott, a Rockville Centre tax accountant.
Let's assume your only 2022 earned income is $6,500 of net self-employment income. To determine your allowable Roth contribution, you must subtract half your self-employment tax from that $6,500. (Self-employment tax is the Social Security and Medicare taxes paid by people who work for themselves.) The self-employment tax on $6,500 is $918. So if you’re 50 or older, your maximum 2022 Roth contribution is $6,041 — $6,500 minus $459 (half the $918 tax). If you’re under 50, your maximum contribution is $6,000.
The bottom line
Roth IRA contributions are limited by income eligibility rules.
