What Are the Qualifications for a Roth IRA?
Understand the specific financial requirements for a Roth IRA. This guide explains how income, employment, and filing status determine contribution eligibility.
A Roth Individual Retirement Arrangement (IRA) is a retirement account funded with after-tax money. This allows investments to grow tax-free, and withdrawals, known as distributions, are also tax-free in retirement. To use this type of account, an individual must meet specific qualifications set by the Internal Revenue Service (IRS).
The Earned Income Requirement
A rule for contributing to a Roth IRA is having earned income for the year of the contribution. The IRS defines earned income as taxable compensation from working, including wages, salaries, tips, commissions, bonuses, and net earnings from self-employment. If you perform services for pay, that income qualifies.
Certain types of income are not considered earned and cannot be used for Roth IRA contributions. The source of the funds must be from active work or specific disability payments if you are unable to work. Non-qualifying sources include:
- Interest and dividend income from investments
- Rental income from property
- Distributions from pensions or annuity plans
- Unemployment benefits
- Child support
- Any deferred compensation received from a non-qualified plan
An exception to this rule applies to married couples who file their taxes jointly. This provision, often called the spousal IRA rule, allows a spouse with little or no earned income to contribute to their own Roth IRA. This is permissible as long as the other spouse has sufficient earned income to cover the contributions for both individuals. For the contribution to be valid, the couple must file a joint federal tax return, and the total combined contributions cannot exceed the couple’s total earned income for the year.
Income and Contribution Limits
Eligibility to contribute to a Roth IRA is tied to your Modified Adjusted Gross Income (MAGI). MAGI is your Adjusted Gross Income (AGI) from your tax return with certain deductions added back, such as student loan interest or tuition and fees. The IRS uses this figure to determine if your income is too high to make Roth IRA contributions for a given year.
For 2025, contribution eligibility depends on income thresholds that vary by filing status. For Single or Head of Household filers, the ability to contribute phases out with a MAGI between $146,000 and $161,000. If your MAGI is below $146,000, you can contribute the maximum; if it is $161,000 or more, you cannot contribute. For Married Filing Jointly or Qualifying Widow(er) filers, the phase-out range is a MAGI between $230,000 and $240,000. A range of $0 to $10,000 applies to those Married Filing Separately who lived with their spouse during the year.
If your MAGI falls within the phase-out range, you can only make a reduced contribution. The reduction is proportional to how far your income is into the range. For example, a single filer with a $150,000 MAGI is $4,000 into the $15,000 phase-out range. This means they must reduce their contribution by 26.7% ($4,000 / $15,000). The maximum annual contribution for 2025 is $7,000, so their maximum allowed contribution would be $5,131 ($7,000 minus the $1,869 reduction).
Individuals age 50 or over can make an additional “catch-up” contribution of $1,000 for 2025, for a total of $8,000. This catch-up provision is subject to the same MAGI phase-out rules. The total contribution, including the catch-up amount, is what gets reduced if income is in the phase-out range.
Correcting Excess Contributions
Contributing to a Roth IRA when you are not eligible results in an excess contribution. These are subject to a 6% excise tax for each year the excess amount remains in the account. To avoid this penalty, you must correct the error using methods outlined by the IRS.
One method is to withdraw the excess contribution and any net income it earned before your tax return deadline, including extensions. For most people, this is April 15 of the year after the contribution was made. The withdrawn earnings must be reported as taxable income for the year the excess contribution occurred.
Another option is to apply the excess contribution to a subsequent year’s contribution limit. For instance, if you mistakenly contributed an extra $2,000 for 2024, you could leave the funds in the account and treat them as a 2025 contribution. This is only possible if you are eligible to make a contribution in that following year. While this method avoids withdrawing funds, the 6% excise tax will still apply for the initial year. You would report the excess on Form 5329, pay the 6% tax for that year, and then reduce your allowable contribution on the following year’s tax return.