2019 Roth IRA limits: Everything You Need to Know

Faculty Member David Littell Landscape Photo
Barbara Whelehan, Bankrate
February 22, 2019

Assistant Professor of Taxation, David Littell met with Bankrate to discuss Roth IRAs and more. This article was originally published in Bankrate.

While traditional IRAs were first introduced in the mid-1970s, the Roth IRA made its debut in 1998, courtesy of the Taxpayer Relief Act of 1997.

In those days, the contribution limit for both types of IRAs was a modest $2,000 a year, though it gradually increased over the past 20 years.

Roth IRA contribution limits for 2019 are now $6,000, up from the $5,500 limit allowed during the previous six years. Folks who are age 50 or older can tack on another $1,000, for a total Roth IRA contribution limit of $7,000 in 2019.

What qualifies as earned income for an IRA?

You need earned income in order to make IRA contributions. You can only make a $6,000 contribution if you earn $6,000. If you earn $3,000, that’s all you can contribute.

Earned income consists of wages, salaries, tips, commissions, bonuses, union strike benefits and long-term disability benefits received prior to retirement. If you’re self-employed or own a business, your net profit counts as earned income. Net profit is calculated by subtracting expenses and taxes from revenues or income.

The IRS stipulates that the following sources of money are not earned income:

  •        Interest and dividends from investments
  •        Retirement income from pensions or IRAs
  •        Social Security benefits
  •        Unemployment benefits
  •        Alimony
  •        Child support
  •        Pay received while an inmate is in prison

Roth IRA income restrictions

Your earnings and filing status may limit the amount of money you can contribute to a Roth. Some people who earn above a certain threshold may not contribute to a Roth at all. Married people who file separately and who live with their spouse at some point during the year are the most severely restricted. If their earnings exceed $10,000, they’re out of Roth IRA contribution luck. But let’s face it: If they earn less than that, they likely wouldn’t put money in a Roth IRA.

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