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Jackson and Ashley Turner (both 45 years old) are married and want to contribute to a...

Jackson and Ashley Turner (both 45 years old) are married and want to contribute to a Roth IRA for Ashley. In 2018, their AGI is $193,800. Jackson and Ashley each earned half of the income.

a.) How much can Ashley contribute to her Roth IRA if they file a joint return?

b.) How much can Ashley contribute if she files a separate return?

c.) Assume that Ashley earned all of the couple’s income and that she contributed the maximum amount she is allowed to contribute to a Roth IRA. What amount can be contributed to Jackson’s Roth IRA if they file a joint return?

Solutions

Expert Solution

a.) How much can Ashley contribute to her Roth IRA if they file a joint return?

Contribution to Roth IRA is $110.

Individuals are allowed to contribute to a Roth IRA as long as their AGI falls below certain threshold limits. The AGI threshold limits for married individuals filing jointly is between $184,000 and $194,000. Because Jackson and Ashley's AGI is 20% of the way between $184,000 and $194,000 [($193,800 - $184,000)/($194,000 - $184,000)], Ashley's maximum contribution is phased out by 98%. That is, of the $5,500 maximum contribution, Ashley may contribute $110 [$5,500 × 2% (100% - 98% phased-out percentage)].

b.) How much can Ashley contribute if she files a separate return?

Contribution to Roth IRA $0

$0. The AGI threshold limits for married individuals filing separately is between $0 and $10,000. Thus, if they filed separately, Ashley would not be able to contribute to a Roth IRA.

c.) Assume that Ashley earned all of the couple’s income and that she contributed the maximum amount she is allowed to contribute to a Roth IRA. What amount can be contributed to Jackson’s Roth IRA if they file a joint return?

Contribution to Roth IRA $110

Because Jackson is the lesser earning spouse, the starting point for determining the amount he can contribute is the lesser of $5,500 or $193,690 [total earned income of both spouses of $193,800 reduced by the $110 contribution to Ashley's account (see answer to part a)]. However, because the couple's AGI of $193,800 exceeds $184,000, 98% of Jackson's contribution limit is phased out [($193,800 - $184,000)/($194,000 - $184,000)]. That is, of the $5,500 maximum contribution, only $110 [$5,500 × 2% (100% - 98% phased-out percentage)] may be contributed to Jackson's Roth IRA.

jeff jeffy answered 1 year ago
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