Roth IRA Qualifications

There are specific requirements that determine your eligibility to open and contribute to a Roth IRA account. These factors include:

• Earned Income
• Income Limits
• Approved Institution
• Contribution Deadline

Each factor is outline below to see if you qualify to contribute to a Roth IRA.

Earned Income

Your earned income is tallied from your salary, wages, professional fees, and any other income you receive for services provide. Other income sources that make you eligible to contribute to a Roth IRA account include tips, commissions on sales, profit sharing related to a job, and bonuses. You can not use interest, dividends, rental property income, disability payments, capital gains, social security payments, income from pension or annuities in regard to Roth IRA eligibility.

You can remember what qualifies as income using a simple rule of thumb: if you provide labor, skill, or brain power to earn your money, your income will be eligible for a Roth IRA account. If you don’t actually do any work to earn the income, it will not be a qualifying resource for income.

Income Limits

In addition to earned income requirements, you must be in a certain range of income to qualify. The total amount of income is based on your Modified Adjusted Gross Income, which can be found on the IRS Form 1040 used for filing taxes. The rules for annual maximum income eligibility is as follows:

• $120,000 for individuals filing as single, head of household, or married filing separately whom did not live with their spouse during the tax year

• $176,000 for married individuals that file joint taxes.

• $10,000 for married individuals who file separate taxes and lived with their spouse during the tax year

Approved Institution

In order to qualify for a Roth IRA, you must open the account with an IRS-approved financial institution and the account must remain at the same institution. Financial institutions can include banks, credit unions, savings and loan associations, brokerage firms, and most other FDIC-insured financial institutions. You can apply in person when opening an account or you can apply online.

Contribution Deadlines

Depending on your age and income, you can contribute up to $6,000 annually but you can not contribute more in one year because you didn’t contribute as much in a previous year. You can contribute in a year up to the maximum amount provided it is done before the deadline. The contribution deadline for Roth IRA accounts is the same as the tax filing deadline, April 15^th. In the event you must extend your own tax deadline, you can not extend your contribution deadline.

If you meet all of these requirements, you can open a Roth IRA today but if you are unsure about any of the eligibility requirements, consult with your accountant or financial advisor before applying to open a Roth IRA account.