Roth IRA Contribution Limit
Individuals may contribute up to $5,500 to a traditional and a Roth IRA for 2016. This is the same limit as 2015. An individual age 50 and older can made a catch-up contribution of an additional $1,000 for the year. The contribution is limited to the taxpayer’s taxable compensation for the year, minus contributions to all non-Roth IRAs.
Taxpayers can contribute to a Roth IRA as long as the taxpayer’s adjusted gross income for the year is less than:
- $193,000 for married filing jointly or qualifying widow(er),
- $131,000 for single, head of household, or married filing separately and you did not live with your spouse at any time during the year, and
- $10,000 for married filing separately and you lived with your spouse at any time during the year.
Unlike traditional IRAs, the owner of a Roth IRA can make contributions to the IRA after turning age 70 ½ and does not have to begin taking contributions at that age. The mandatory distribution rules that normally begin at age 70 ½ do not apply until the owner dies.
Although contributions to a Roth IRA are not deductible, income accumulates tax-free and “qualified” distributions will also be tax-free, if certain conditions are satisfied:
- The distribution must be made after the owner turns 59 ½, unless the owner is disabled or the payment is made to a beneficiary after the owner’s death; and
- The amount contributed must be held in the Roth IRA for at least five years.
Taxpayers can also roll over benefits from an eligible retirement plan to a Roth IRA, without the rollover being counted against the annual contribution limit, provided the payment from the retirement plan is an eligible rollover distribution. The retirement plan can be a qualified plan, 401(k) plan, tax-sheltered annuity, or governmental deferred contribution plan. The payment will still be taxable, since contributions to a Roth IRA are not deductible and must be made with after-tax dollars.