1) What is a Roth IRA?
A Roth IRA is an individual retirement account that is similar to a Traditional IRA, however, you cannot deduct contributions to a Roth IRA from your taxable income.
2) How do I know if I'm eligible to contribute?
Generally, you can contribute to a Roth IRA if you have taxable compensation and your Modified Adjusted Gross Income (MAGI) is less than:
- Married Filing Jointly or Qaulifying Widow(er):
- 2014: $181,000 and not more than $191,000
- Single, Head of Household, or Married Filing Separately and you did not live with your spouse at any time during the year:
- 2014: $114,000 and not more than $129,000
- Married Filing Separately and you lived with your spouse at any time during the year.
3) What is considered compensation?
Compensation includes wages, salaries, tips, professional fees, bonuses, and other amounts received for providing personal services. It also includes commissions, self-employment income, nontaxable combat pay, military differential pay, and taxable alimony and separate maintenance payments.
4) What is Modified AGI?
Your modified AGI for Roth IRA purposes is your adjusted gross income (AGI) as shown on your return modified for certain deductions or expenses. Use the worksheet in IRS Publication 590 to determine your Modified Adjusted Gross Income.
5) Is there an age limit for contributions?
Contributions can be made to your Roth IA regardless of your age.
6) Can you contribute to a Roth IRA for your spouse?
You can contribute to a Roth IRA for your spouse provided you file jointly and your MAGI is less than $181,000 and not more than $191,000 in 2014.
7) What are the Roth IRA Contribution Limits?
The 2014 and 2015, the contribution limit for Roth IRAs is $5,500.
8) Can I make catch-up contributions?
In 2014 and 2015, if you're age 50 or older you can contribute up to $6,500.
9) When must I start taking withdrawals from my IRA?
You are not required to take distributions from your Roth IRA. You can leave amounts in your Roth IRA as long as you live.
10) Are distributions taxable?
Qualified distributions or distributions that are a return of your regular contributions for your Roth IRA are not taxable.
11) What are Qualified Distributions?
A qualified distribution is any payment or distribution for your Roth IRA that meets the following requirements:
- It is made after the 5-year period beginning with the first taxable year for which a contribution was made to a Roth IRA set up for your benefit, and
- The payment or distribution is:
- made on or after the date you reach age 59 ½
- made because you are disabled
- made to a beneficiary or to your estate after your death, or
- one that meets the requirements under the First Home Exceptions up to a $10,000 lifetime limit.
12) When is a distribution taxable?
If you receive a distribution that is not a qualified distribution, you may have to pay the 10% additional tax on early distributions. See the IRS Publication 590 for further information.
13) Where can I learn more about Roth IRA Rules?
Guidance regarding the rules and restrictions imposed upon IRAs can be found in IRS Publication 590