So you’re getting married in 2021? Congratulations.
When you add your combined income (yours and your
spouse’s), you may earn more than the limit to contribute
to a Roth IRA. You may think since you’re below the income limit
now, you can contribute to a Roth before the
wedding. But guess what? You can’t.
The rules are the rules
If you're married as of Dec. 31, you're
considered to be married for the full year for tax
purposes – no matter what the wedding date. That
means you'll file your taxes as married - either jointly
or separately - for 2021.
You'll also be subject to the joint income limits for
Roth contributions for the full year. If you're married
filing jointly and your combined adjusted gross income
is less than $198,000, then you both can contribute
the full $6,000 to a Roth for the year (or $7,000 if
you're age 50 or older).
Once your joint income reaches $198,000 to
$208,000, then you both can make reduced
contributions. You can't contribute to a Roth at all if
your joint income is more than $208,000. See IRS
Publication 590-A, Individual Retirement
Arrangements, for a worksheet to calculate your
modified adjusted gross income for the Roth limits.
And you can't get around the Roth limits by filing
taxes separately. The income limit is just $10,000 for
married people filing separately if you lived with
your spouse at any time during the year.
If you earn too much to contribute to a Roth, you can
both put money instead in nondeductible traditional
IRAs for 2021 and then convert them to Roths. But
you could be taxed on a portion of the rollover if you
have any other money in traditional IRAs (the tax-free
portion of the conversion is based on the ratio of your
nondeductible contributions to the total balance in all
of your traditional IRAs).
Be careful of excess contribution penalties
If you had already contributed to the Roth for the year
and now your income disqualifies you, you would still
have time to undo the contribution. Otherwise, you
would have to pay a 6% penalty on excess
You could take the contributions (and any earnings
on them) out of the Roth before the tax-filing deadline,
or you could have your IRA administrator switch your
2021 Roth contributions (plus all earnings on that
money) into a traditional IRA. If you made
contributions to the Roth in earlier years, the
administrator should calculate how much of the
earnings in the account should be attributed to the
2021 contribution. You can keep the money from
previous years' contributions in the account.
Be sure to consult your financial advisor to help you
determine whether your contributions qualify or not.
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