November 26, 2020

Traditional IRA Income Limits 2020

Traditional IRA Income Limits 2020 hey Dustin Tibbets here financial advisor with jazz wealth managers how you doing today thank you for watching our channel.

I don't say that enough I appreciate all the views subscribers and everybody that's paid attention to this ugly face teaching you guys. Over the last couple years when anyways it's gonna be a new year here soon 2020 and the IRS is starting to put out some numbers in terms of guidance as far as your income limits.

And how much you can contribute to different retirement accounts and. So we just wanted to get a head start on that and give, you guys the update here today we're talking about the max income that you can make or I should say the max income limits for 2024 contributing to a Roth, IRA now to be fair the IRS words it as max income limits but they're not talking about your income they're not.

Talking about your salary I've. Done a lot of videos on this in the past we're talking about your modified adjusted gross income which is essentially you start at the top with, everything you have you get all the way down to your adjusted gross income on your tax return add back a few things and that's your modified adjusted gross. Income quick call to your CPA or looking, it up on your previous tax returns may help you figure that out but what happens is in a Roth, IRA if you make too much you actually can't contribute now it's not an immediate like you make too much and bam you can't contribute anymore for that year it's a phase-out.

And so the IRS puts out these, numbers to say hey look if your income gets to this point you can still contribute but you're gonna contribute a smaller, amount we're gonna ask you to scale back your contribution if your income gets to the max number you are.

Phased out that's the fancy way of saying it if you want to look these things up or ask your accountant about them or your financial advisor if they maybe happen to help you alright, so for 2020 what they, did is they gave basically an across-the-board cost-of-living adjustment in terms of your max income. Allowable so I want to go over that here with you and basically we break it down by your filing status now if you are a single person you. File your taxes as a single person and you want to contribute to a Roth IRA then you're phase out for the single, individual is gonna be different than if you're married filing jointly married filing separately. And things like that so as a single person pay close attention here because this is different we just did a video yesterday about the IRA deduction, amounts these numbers seem like they're close but they're not watch this so your phase-out is from one hundred and twenty four to one.

Hundred and thirty nine thousand dollars your modified adjusted gross income his, first singles also a head of household if you happen to be head of household there so you got, basically a two thousand dollar increase it was 122 and 137 just about the time I start remembering all these numbers they go and change, them on me so we're now sitting at 124 139 your modified adjusted gross income if you're single if you're married filing jointly. You've got a three thousand dollar increase that one's easy to, remember married filing jointly now for a Roth IRA unlike yesterday's video where we were talking about what if you had a, 401 K what if you don't in a Roth IRA it doesn't matter so the IRS doesn't care if your spouse has a 401 K if you. Have a 401 K for a Roth it's different a traditional IRA yeah your income changes a little.

Bit so today we get to just say married filing jointly and we don't care what other types of accounts you have yours is, now from 196 to 206 modified adjusted gross income two hundred six. Thousand you got a three thousand dollar bump from 2019 to 2020 so if you happen to get a little bit of a, raise and you find that you were close anyways now at least the bar has been raised a little, bit for you if you are married but you, file separately they always give you guys the shaft on this one your phase-out is still between zero and.

Ten thousand dollars to contribute to a Roth this is very very important and I say this one sort of I'm not joking if you are married filing separately but you guys are still together right. And you chose for other reasons student loans taxes things like that child support you chose, to file separately that's okay you don't have to you know raise your hand and say this is why we chose to do this you just, need to know that rule that you cannot contribute to a Roth IRA almost in no case, but is if you make less than ten thousand you can contribute something but who who's in that situation. Right so if you make over ten thousand dollars and you're married but filing separately and living with the spouse still you didn't get a raise. I'm sorry you can't contribute to a Roth IRA now, if you still want to get money and post tax through like you know a little.

Bit of extra work we can still make that happen legally I'm not like pulling your chain here you know legally you could do it but you know as a direct. Contribution those are your income phase-out limits. For the year really simple video today right I'm happy to help to keep us in mind at jazz wealth we are not only trying, to be financial advisors but your personal financial manager I want to help you with all your dough if.

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