Roth IRA Maximum Contribution 2012
It is important that you know the Roth IRA maximum contribution 2012 even though you may not be planning to maximize your contribution in the upcoming year. Knowing the limits might help you avert any tax and penalties from IRS. But what is 2012 Roth IRA maximum contribution limit? Just usual, it all depends on your age and tax filing status.
The IRS stipulates the maximum contribution limits depending on whether you are aged 50 years or younger. Let us have a look at Roth IRA maximum contribution 2012 in detail.
Roth IRA Maximum Contribution 2012 Explained
Roth IRA account holders younger than 50 years old
The IRS stipulates that Roth IRA account holders younger than fifty years are allowed to make a maximum contribution of $5,000 in 2012. However, your own Roth IRA maximum contribution limit can vary depending on your income and your tax filing status.
You are only allowed to make this maximum contribution if:
- If your filing status is single and your annual earned income is at least $5,000 but not more than $110,000.
- If your filing status is married filing jointly and your joint annual earned income is at least $5,000 but does not surpass $173,000.
- Your filing status is married filing separately but earned no more than $0.
Roth IRA account holders aged 50 years or older
Generally, Roth IRA account holders aged 50 years and older are eligible to make a more contribution to Roth IRA. This is due to the fact that they are allowed an additional catch-up contribution of up to $ 1,000. So this implies that they are entitled to a Roth IRA contribution of up to $6,000.
However, this limit is subjected to the IRS Roth IRA income limits 2012. You are only allowed to make the maximum contribution of $6,000 if:
- Your filing status is single and your earned income is a minimum of $6,000 but not more than $110,000.
- Your filing status is filing jointly and your earned income a minimum of $6,000 but does not surpass $173,000.
- Your filing status is married filing separately but earned no more than $0.
Provided that your income falls within these limits, and your 50 years or perhaps older, IRS allows you to make a maximum Roth IRA contribution of $6,000.
The 2012 Roth IRA Income Limits
It is quite unfortunate that not everybody is eligible for the Roth IRA maximum contribution 2012 which may be $5,000 or $6,000 depending on your age. This is as result of the fact that the IRS has put income limits that are used gauge your Roth IRA contribution ability.
The Roth IRA income 2012 limits are as follows;
a. You become ineligible to contribute to your Roth IRA if:
- Your filing status is single and your annual earned income more than $125,000
- Your filing status is married filing jointly and your annual earned income more than $183,000
- Your filing status is married filing separately and your annual earned income more than $10,000
It is regrettable that for those individuals whose annual earned income surpasses the IRS threshold are ineligible to contribute, not even a dollar.
The Income Limit Phase-Out Rules for Roth IRA2012
When your income falls between the maximum Roth IRA contribution threshold and the Roth IRA income ineligibility threshold, your Roth IRA contribution limit is said to have phased out.
Therefore your Roth IRA maximum contribution is phased out if;
- Your filing status is single and your annual earned income falls within $110,000 and $125,000 range.
- Your filing status is married filing jointly and your annual earned income falls within $173,000 and $183,000 range.
- Your filing status is married filing separately and your annual earned income falls within $1 and $10,000range.
If your income ranges in the above categories, you can read the research more on the Phase out Rules 2012 so that you may be able to calculate your contribution appropriately.
The Twist on Maximum Contribution
You are ineligible to make contributions to Roth IRA when your income surpasses the stipulated limits. But one fortunate thing is that the Traditional IRA permits contribution from people with higher income even though they are ineligible to make a contribution to Roth IRA. So still, you can make a maximum contribution to Roth IRA if you wish, regardless of your income. I know you are asking, “How?”
Since the $100,000 income limit obstacle in the conversion process from Traditional IRA to Roth IRA is eliminated, thanks to the Congress legislation, you can convert Traditional IRA to Roth IRA regardless of your income level. This, together with the fact that Traditional IRA accepts non-deductible deductions from any individual regardless of his/her income, the Roth IRA income limit is no more effective.
So, don’t be stressed! In 2012, if you have a Roth IRA account and your income surpass the Roth IRA income threshold; just make the contributions to your Traditional IRA as a non-deductible fund, then immediately convert it to a Roth IRA. Finally, you’ll have made a maximum contribution to your Roth IRA account without forcing any tax liability as you made a non-deductible contribution.
Qualified Earned Income
Roth IRA Maximum Contribution 2012
The Roth IRA contributions have to be made by earned income. You can not fund Roth IRA account with any money. The account needs to be funded specifically by earned income, i.e. compensation form either goods sold or services. Moreover, if you earned less than Roth IRA Maximum Contribution 2012, you are limited to contribute as much as your income. That is, your Roth IRA contribution should never exceed your earned income in a given tax calendar year.
Conclusion
The Roth IRA maximum contribution 2012 limit is mainly determined by two factors namely age and your level of income. In summary, those aged below 50 years are entitled to a maximum contribution of $5,000 while others who are 50 years old or older, are entitled to a maximum contribution of $6,000. But these limits tend to go down when your income is higher than IRS maximum threshold. We did our best to explain Roth IRA Maximum Contribution 2012 in this article.