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Dear Dr. Don,
I'd like to open a Roth IRA account, but our 2007 adjusted gross income (AGI) is too high due to liquidating a large block
of stock we used as a down payment on a house. Normally, we would be below the income threshold.
Can I still open an account this year? In the years to come, if limits on Roth IRAs are not raised, we'll
eventually be above the threshold again. Does this mean in those years we can't continue to contribute to an existing Roth IRA?
-- Todd Taxes
Dear Todd,
Your ability to contribute to a Roth IRA account in 2008 is based on your income in 2008, not your income in the 2007 tax year.
Here's what IRS Publication 590, Individual
Retirement Arrangements, says about the contribution limits for 2008.
Modified AGI limit for Roth IRA contributions increased. For 2008, your
Roth IRA contribution limit is reduced (phased out) in the following situations:
- Your filing status is married filing jointly or qualifying widow(er) and your modified AGI is at least $159,000. You cannot
make a Roth IRA contribution if your modified AGI is $169,000 or more.
- Your filing status is single, head of household or married filing separately and you did not live with your spouse at any
time in 2008 and your modified AGI is at least $101,000. You cannot make a Roth IRA contribution if your modified AGI is $116,000
or more.
- Your filing status is married filing separately, you lived with your spouse at any time during the year, and your modified
AGI is more than zero. You cannot make a Roth IRA contribution if your modified AGI is $10,000 or more.
Thanks to a change in the tax code, in 2010, the income restrictions are eliminated and you'll no longer have
to worry about whether or not you qualify to make a contribution to a Roth IRA account.
So you only have to worry about your ability to contribute to a Roth IRA in 2008 and 2009.
Find the best rates on IRAs using Bankrate's IRA center.
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