Don't Go over Your Roth IRA Contribution Limits

Understanding how Roth IRA contribution limits work can help you avoid any problems in the future. The Roth IRA works differently than a traditional IRA because it is subject to income restrictions. Here are the basics of Roth IRA contribution limits and what happens if you go over them. 

Contribution Limits

Each year you are subject to a maximum contribution for your Roth IRA. You can put in $5000 per year, if you are under the age of 50. If you are over the age of 50, you can contribute as much as $6000 per year. 

Phase Out

If you make between $105,000 and $120,000 as an individual, you can make a partial contribution as part of the phase out plan. If you are married and file taxes jointly, you can contribute a partial amount if you make between $166,000 and $176,000.

Going Over Contribution Limits

If you are not sure exactly how much you are going to make in a year, it can be difficult to know exactly how much you can contribute. For example, if you barely go over the $105,000 threshold for the year and you have already put in $5000 into your account. At that point, you can withdraw the overage and any earnings by the date that you file your tax return. If you do not, you will be required to pay a 6% excise tax. 

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