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A married person MAGI $170,000 year 2020 income. Spouse doesn’t work $0 income. Can this person open a personal Roth IRA? Or does this Roth IRA have to be owned jointly?

Also, is Roth IRA contribution limit based on last year taxes? So in 2021 this person can contribute $6000 even though 2021 year income maybe a million dollars. Is the limit contribution this year based on the MAGI last year?

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    The I in IRA stands for Individual and so there is no such thing as joint ownership of an IRA. Mar 21 at 3:18
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There are no joint IRAs; all IRAs are individual. If this person and his/her spouse file Married Filing Jointly for 2020, then they can each contribute $6000 to their own IRAs.

All IRA limits are based on the year that the contributions are designated under. So how much you can make as 2020 Roth IRA contributions (which can be made up to April 15, 2021) depends on your 2020 taxes, and how much you can make as 2021 Roth IRA contributions depends on your 2021 taxes.

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  • But i dont know how much i will make in 2021. I may guess approximately. Say i guess i will make 170,000 in 2021. I contribute 6,000. Then I get lucky and make 1 million in 2021. Then what happens? The 6,000. That i contributed in 2021 becomes illegal?
    – user107839
    Mar 21 at 4:46
  • @user107839: You will have an excess contribution. You will then have the option of withdrawing excess contributions, including earnings, before April 15, 2022, or recharacterizing it as a Traditional IRA contribution before April 15, 2022; both of these will avoid the penalty. If you do not take it out, you will pay a 6% penalty every year until you take it out or it is absorbed into a future year's unused contribution limit. Or you can just wait until January 1 - April 15, 2022, when you will know your 2021 income, to make the 2021 contribution.
    – user102008
    Mar 21 at 5:31
  • @user107839: If you have no pre-tax money in Traditional/SIMPLE/SEP IRAs (and will not contribute or rollover pre-tax money into Traditional/SIMPLE/SEP IRAs for the rest of the year), a better way to do if if you wish to contribute to Roth IRA for 2021 now without worrying about your 2021 income would be to do a "backdoor Roth IRA contribution" (contribute to Traditional IRA then immediately convert it to a Roth IRA). The result is the same as a regular Roth IRA contribution (assuming, again, that you have no pre-tax money in Traditional/SIMPLE/SEP IRAs), but with no income limits.
    – user102008
    Mar 21 at 5:34
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Yes, this is called a spousal IRA. Assuming the couple is filing jointly, the total MAGI of $170k is below the Roth income limit, so each of them can contribute $6k to a Roth IRA despite one spouse not having income.

The 2020 MAGI determines the limit for 2020 Roth contributions, including those made by April 15, 2021. However, contributions designated for 2021 (which can be made from January 1, 2021, through April 15, 2022) depend on the 2021 MAGI.

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  • But i dont know how much i will make in 2021. I may guess approximately. Say i guess i will make 170,000 in 2021. I contribute 6,000. Then I get lucky and make 1 million in 2021. Then what happens? The 6,000. That i contributed in 2021 becomes illegal?
    – user107839
    Mar 21 at 4:46
  • @user107839 Not a crime -- at worst there would be a tax penalty on the amount you contributed over your limit. You can fix it by withdrawing the excess contribution.
    – nanoman
    Mar 21 at 5:11
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from multiple comments you made:

But I don't know how much I will make in 2021. I may guess approximately. Say I guess I will make 170,000 in 2021. I contribute 6,000. Then I get lucky and make 1 million in 2021. Then what happens? The 6,000. That I contributed in 2021 becomes illegal?

One of the great benefits of the IRA or Roth IRA is that if you are concerned about the limits, you can wait until the year is done and then in the January 1st to April 15th period decide how much to contribute, and to the type of contribution.

One could say that by doing it this way you are missing out on a potential year of growth. But by doing it this way the worry about exceeding a limit is reduced.

Some people wait until the early 2021 period to make their 2020 contribution, and they use the tax refund to fund the contribution. Yes they can determine how much they will contribute, and what type of account hey will contribute to, include it on the tax forms they submit in February or March, then when they get the refund a few weeks later put the money into the IRA/Roth IRA. They just have to beat the 15 April deadline.

Also if you do contribute more than you are allowed, it isn't a crime, as long as you address it on your tax forms and move the funds be the required date. There are many questions about how to address the excess contribution. It will cost you money in terms of taxes, but you won't go to jail over it.

IRA's are individual, that is what the I stands for. There are provisions regarding limits (minimum and maximum) when people are married. Those provisions can determine how much is deductible, and how much can be contributed. But there are no joint IRAs.

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