To establish the funds in the Roth IRA the individual must have taxable compensation or must have self-earned income that is income earned as sole proprietorsor in a partnership firm and the individual must be eligible to make contributions that is based on the income limit. The Roth IRA income limits is an important criterion for calculations and according to this the individual must have a modified adjusted gross income (MAGI) that is less than a certain amount, depending on the tax-filing status of the individual and the income limits for the current year or the year of filling.
Roth IRA MAGI Limits 2010 are for married couples who file a joint tax return the income limit is $165,000 and for individuals, who are married and live with their spouse but file a separate tax return the income limit is $ 100,000 and $105,000 for individuals who file as single tax return and are the head of family married but separated from their spouse.
Roth IRA MAGI Limits 2011are for married couples who file a joint tax return the income limit is$169,000and for individuals, who are married and live with their spouse but file a separate tax return the income limit is $ 100,000 and for individuals who file as single tax return and are the head of family married but separated from their spouse $107,000.
If the individuals MAGI do not fall in the above stated range then that are not able to contribute and if the MAGI do fall in the range then to determine the amount they may contribute the following formula can be useful.
Firstly – Subtract the lowest amount in the range from MAGI
Thendivide the result by the difference between the lowest amount in the range and the highest amount in the range
Multiply the result by the maximum contribution limit of the current year.
Lastly subtract the result from the maximum contribution limit.
The result is the amount the individual is allowed to contribute to a Roth IRA of the current year.