Question

For 2019, Chanda is 36, single, and an active participant in a qualified employee pension plan. Determine the maximum Roth IRA contribution that she can make in each of the following cases:

a. Assume that she did not make any contributions to other IRA accounts during the year. When her adjusted gross income for the year is $66,000, Chanda is allowed to contribute $_6,000_ to her Roth IRA.

b. When her adjusted gross income for the year is $125,000, Chanda is allowed to contribute $______ to her Roth IRA.

c. When her adjusted gross income for the year is $139,000, Chanda is allowed to contribute $_0_ to her Roth IRA.

d. When her adjusted gross income for the year is $65,000, and she makes a $3,500 contribution to a deductible IRA account, Chanda is allowed to contribute $_2,500_ to her Roth IRA.

Answer 1

Total contributions made to IRA accounts should not exceed $6,000 per taxpayer if he is under age of 50 years. If income of single taxpayer hits $137,000 then he is not allowed to contribute at all.

a) Chanda is a single taxpayer. When her adjusted gross income for the year is $66,000, Chanda is allowed to contribute $6,000 to her Roth IRA.

b) In the given case, her adjusted gross income exceeds $122,000. Roth IRA deduction allowed to Chanda is calculated as -

Maximum Roth IRA contribution = $6,000 - [$6,000 * {(Adjusted Gross Income - $122,000) / $15,000}]

= $6,000 - [$6,000 * {($125,000 - $122,000) / $15,000}]

= $4,800

Chanda contributes only $4,800 to Roth IRA.

c) As total income of Chanda exceeds the maximum limit for Roth IRA i.e. $137,000 therefore she is not allowed to mae any contribution in Roth IRA.

d) When her adjusted gross income for the year is $65,000, and she makes a $3,500 contribution to a deductible IRA account, Chanda is allowed to contribute balance of $2,500 ($6,000 - $3,500) as taxpayer is allowed to contribute maximum amount i.e. $6,000 to all of her IRA accounts.