Question

Finnian (32, wages $127,000) and Rhonda (30, wages $99,000) live together and file a joint return...

Finnian (32, wages $127,000) and Rhonda (30, wages $99,000) live together and file a joint return They would like to contribute to Roth IRAs. Neither is covered by an employer plan. May they contribute to a Roth IRA?

A)No, their AGI is too high to contribute to Roth IRAs.

B)Yes, but they will have to file separately to be within the income limits.

C)Yes, they can contribute to a traditional IRA and then convert the contributions to Roth IRAs.

D)No, their combined income is too high to make any type of IRA contribution.

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Answer #1

Option A - No, Their AGI is too high to contribute to Roth IRAs

In order to contribute to a Roth IRA by taxpayers filing a joint return, their income shall be less than the limits specified below:

Married and filing a joint return - Less than $2,06,000 (Limits applicable for the year 2020)

Here Finnian and Rhonda filing a joint return has an AGI of $ 2,26,000 (1,27,000+99,000)

So they are not eligible to make contributions to Roth IRA since their AGI is beyond the specified limits.

For traditional IRA there is no income limit so they are eligible to make Traditional IRA contributions and can also convert them into Roth IRA. In order to convert to Roth IRA they have to initially contribute to Traditional IRA.

So Finnian and Rhonda filing jointly with an AGI of $ 2,26,000 is not eligible to directly contribute to a Roth IRA.

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