Roth IRA Contribution Rules 2012 & Income Limits

What’s new with Roth IRA rules in 2012? Be sure to bookmark this page for reference. First, let’s recap the Roth IRA maximum contribution limits. These vary depending on your age, and the 2012 rules haven’t changed significantly since the 2011 Roth Income Limits.

Basically, if you are under fifty in 2012, the most the IRS rules allows you to contribute to your Roth IRA is five thousand dollars. If you are over fifty, they are a bit more generous and allow you to contribute up to six thousand dollars. This is known as the catch-up provision and applies to most, but not all, types of retirement accounts.

Keep in mind that these contribution limits apply to the combined contribution to both your Roth and traditional IRA, if you have both types of accounts. So your combined contribution to both of these funds cannot exceed these limits based on your age.

The tricky part is the income limits. Unlike traditional IRA limits, which restrict the amount of your contribution from your taxable income, the Roth IRA rules work in reverse. This means that your income determines how much you can contribute to your Roth. These income limits are based on your modified Adjusted Gross Income (AGI) and  your tax filing status. The higher your AGI, the less you can contribute.

Roth IRA income limits for 2012

If you file your taxes as a single filer, head of household or married filing separately (where you and your spouse did not live together), then you can make a full contribution to your Roth IRA up to one hundred and ten thousand dollars. Up to this amount you face no restrictions, but once your income increases above this point, the IRS begins to “phase out” the amount you can contribute. Finally, once your income reaches above one hundred and twenty-five thousand dollars, no contribution is allowed. This 2012 limits is up from 2011.

If your tax status is married filing jointly, your contribution limits begins to phase out at one hundred and seventy-three thousand dollars and no contributions are allowed above and income limit of one hundred and eighty-three thousand dollars. This 2012 rule represents an increase of four thousand dollars over 2011.

Finally, if your tax status if married filing separately (you lived together at least part of the year) you can only make the maximum Roth contribution if your modified AGI was zero! The phase out income range goes up to ten thousand dollars, at which point no contributions are allowed.

Check out the IRA Contribution Cheat Sheet for more, or the graph below should help.