Roth IRA Contribution Limits 2024- Know Eligibility, Contribution and Income Limits

The Roth IRA which is also referred as Roth Individual Retirement Account is a tax-advantaged account which allows an employer to contribute a portion of their income for retirement benefits. The Roth IRA is like the traditional IRA except for the contributions made by the employees will be after tax. It means, there will be no tax deduction at the time of your withdrawal during your retirement. In traditional IRA, an employee contributes his or her pre-tax wage which leads to a tax deduction at the time of withdrawal. However, the Internal Revenue Service has set a certain limit for the maximum contributions an employee can make via their pay checks.

In addition to it, income limit which is based on modified adjusted gross income (MAGI) will also play a key role while determining your contribution limits. The limits keep changing annually and it is advised to the employees to stay updated with the latest updates via IRS.  The major benefit of the Roth IRA is that you will contribute the money which is already tax paid and at the time of withdrawal, unlike traditional IRA, there will be no tax deduction in your money. On continuing to this post, you will able to gain insights on the Roth IRS contribution and income limits for 2024 along with the determining factors regarding the limits.

Roth IRA Contribution Limits 2024

As noted previously, there are limits set by the IRS to which you can contribute to IRA. In 2023, the Roth IRA contribution limit was $6,500 for an employee under 50 years of age. In addition to it, the employees who are 50 years old or above had a maximum contribution limit of $7,500 in 2023. The Roth IRS contribution limits for 2024 is set at $7,000 for employees who are under 50 years old and to $8,000 for those who are 50 years old or above. Moreover, the limit is set for both types of IRA which are Roth IRA and traditional IRA. For instance, if you put some money in Roth IRA and some money in traditional IRA, the contribution limit must not exceed $7,000 if you are under 50 years of age and $8,000 if you are 50 years old or above.

Apart from this, there is also an income limit which has been set by the IRS and all the employees must meet the requirements in order to be an eligible filer. The income limit is based on modified adjusted gross income. Based on the limit, if your income exceeds, then your contribution limit will be reduced. For instance, if your income remains in the range of $146,000, then you are eligible for the full contribution. You can have detailed look at the maximum income limit required to meet in the following table:

Filing Status Roth IRA Income Limit Roth IRA Contribution Limit
Single, head of household and married filing separately $146,000 $7,000 ($8,000 if above 50)
$146,000 to $161,000 Contribution will be reduced
More than $161,000 Contribution not allowed
Married (joint file) or survivor Below $230,000 $7,000 ($8,000 if above 50)
$230,000 to $240,000 Contribution will be reduced
More than $240,000 Contribution not allowed
Married filing separately on living with spouse at any time of year Less than $10,000 Contribution is reduced
$10,000 or more Contribution not allowed

Roth IRA Contribution Limits 2024- Know Eligibility, Contribution and Income Limits

Withdraw Your Roth IRA Contributions

The employees who have made contributions to Roth IRA can withdraw their earnings at any time of the year they wish. The distribution will not be a taxable income and no penalty will be imposed if an employee is withdrawing an amount equal to the total, they have put in. However, you must be aware of the five-year rule in order to be qualified to avoid any penalties. The five-year rule of Roth IRA distributions allows the employees to tax fee withdraw their earnings but the five years must have passed of the tax year in which the employee made first Roth IRA contribution. Apart from that, following requirements must be fulfilled by the participant for non-tax and penalties earnings:

On meeting five-year rule

  • The holder must be of at least 59 ½ at the time of distribution to avoid taxes and penalties.
  • In case of any disability, the participant can withdraw their earnings if they are under 59 ½ and the earnings will be avoided to taxes and penalties
  • In case of the death of participant, the survivor of Roth IRA holder can have excess to the distributed assets and the taxes and penalties will be avoided.
  • On using the money for first-time purchase ($10,000 lifetime limit applies).

In case you don’t meet five-year rule

  • If you are 59 ½ years old or above, then you can avoid the penalty but not the taxes.
  • For first time purchasing home ($10,000 limit), on a permanent disability and in case of your death, the survivor can have excess to the assets by avoiding penalty but not the taxes.

Roth IRS Contribution Limits 2024 – Additional Details

As noted above, the contribution limit must be met in order to be an eligible filer for retirement benefits when you will turn 59 ½ years old or above. However, what if you have exceeded the contribution limit set by the department? In that case, a penalty will be imposed by the Internal Revenue Service which can lead to wiping out your investment income. However, there is good news for you. You are allowed to mend your mistake if you realized it before filing your tax returns. An IRA holder can withdraw the excess contribution he or she have made and the earnings they have received over them.

However, in case you have already filed your tax returns, you have until six months to withdraw your excess contributions and earnings and to file an amended tax return. Under this, you will have to pay taxes but on the other side you can avoid penalties. Apart from it, if you have not withdrawn your excess contribution and earnings within 6 months of filing your tax returns, then you can reduce the contribution in the following year. Nonetheless, you will have to face a 6% of penalty to the excess contributions you have made. For more information for the guidelines, you can also visit the official website of the authorities.

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