I’ve read a lot about the $6000 annual limit for Roth IRAs, but I also was reading online that there are limits based on income? How does income level affect the contribution limit? For reference, I file as Head of Household.
Welcome! I found this information on the IRS website: https://www.irs.gov/retirement-plans/plan-participant-employee/amount-of-roth-ira-contributions-that-you-can-make-for-2020
HoH making less than $124k can contribute up to the limit.
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Is that gross or AGI? What is Modified AGI and how is that calculated? Is there a penalty if I over contributed?
What l know is If you over contribute to a Roth IRA , you 'll have to withdraw the excess and any earnings on it. Otherwise, you 'll pay a 6% tax on ineligible contributions, plus you’ll pay a 10% early withdrawal penalty if you’re younger than 59.5.
This was answered live in office hours! You can see the recorded version in the course archive! (for subscribers)
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I watched the office hours but I don’t think this was ever addressed:
Is the max dollars you can contribute to IRA based on last years earnings or current year? And is it total income or adjusted gross income (AGI)?
Ex: Made 100,000 in 2019- can contribute $6000 to IRA in 2020
Made $130,000 (more than the $124K) in 2019, so have to contribute less than $6000 in 2020
OR
-Will make $100,000 in 2020 so 2020 IRA contributions can be $6000
-Will make $130,000 in 2020 so 2020 IRA contributions have to be less than the $6000
Also if you make more than $124k but less than $139k how do you figure out how much you can contribute?