Why does the IRS establish a Modified AGI limit for contributions to Roth IRA accounts? I can understand having a limit for Traditional IRA accounts because the government doesn't want to lose out on taxes in a high tax bracket, but Roth IRA contributions are after-tax anyway.

  • 3
    Wouldn't it look like a tax shelter for the rich? After all, one can always contribute to a Traditional IRA, though the contributions aren't always tax deductible.
    – JB King
    Commented Dec 4, 2015 at 15:16
  • 12
    Asking for the "why" behind any tax code is an exercise in futility. "Income limits" = "more money for government". "No income limits" = "less money for government". That's really all there is to it.
    – Ben Miller
    Commented Dec 4, 2015 at 16:30
  • 1
    "I can understand having a limit for Traditional IRA accounts" Actually, there is no income limit for contributing to Traditional IRAs. There is an income limit for deducting Traditional IRA contributions, under some circumstances.
    – user102008
    Commented Dec 5, 2015 at 0:02
  • In reality, there are (legal) ways around the income limits for Roth IRAs anyway. Assuming you don't have an existing traditional IRA balance, you can always do a "backdoor" Roth by contributing to a traditional IRA (without getting the deduction since you're above the limit) and then immediately recharacterizing it as a Roth IRA (which is generally a taxable event, except that you already paid taxes on your contributions and therefore aren't taxed doubly). It gets a bit more complicated if you have an existing traditional IRA balance (look up the pro-rata rule). Tax law is weird.
    – Andrew
    Commented Jun 18, 2018 at 7:22

4 Answers 4


Because Congress said so. Now, if you're asking for the legislators' rationale, it's something along the lines of:

  1. We only create tax shelters when we "need" to; otherwise we just make our deficit worse for no reason. Absent a particular need, better to just lower the tax rate in general.
  2. It's a national priority that people be able to secure their retirements.
  3. High income earners already have secured retirement, so no further tax shelter of retirement income needed.
  4. Middle income earners need the tax shelter, both for practical help saving, and to encourage them to do so in the first place.
  5. end result... income limit on IRA contributions.

Of course, not everyone in Congress agrees with all of the above reasons. I'm sure there are PLENTY of legislators that vehemently disagree with the idea of income limit for contributions.

But like everything else, it's the result of lots of compromises over a host of issues. But that's the general idea that most legislators could rally around, or they wanted something else in the bill, or they wanted to provide political support to their party leader, and didn't object to this enough to fight it, so that's what the majority approved.

  • 1
    Thank you! I think this answer addresses my question much more directly than the other answers already given do.
    – Daniel
    Commented Dec 4, 2015 at 16:52
  • "the legislators' rationale" = the language that emerged from the committee!
    – user662852
    Commented Dec 4, 2015 at 17:14
  • This still doesn't seem to answer why traditional IRAs aren't limited, and only Roth IRAs are.
    – xyz
    Commented Nov 27, 2016 at 1:37
  • @xyz, 1) you're asking a different question than the OP, and 2) you're mistaken; traditional IRAs are limited, too, not just Roths. irs.gov/retirement-plans/plan-participant-employee/…
    – David
    Commented Nov 29, 2016 at 1:28

A Roth IRA is still a tax shelter. It allows for tax-free gains.


Roth contributions are after tax, but the earnings thereafter are tax-free. So, the government doesn't permit high earners to take advantage of this and shelter their earnings from taxes this way. It's not really different from a traditional IRA in that; it's just different in when the earnings are taxed versus tax-free.

  • 7
    But there's a contribution limit (not very high) for IRAs. So why does the government care how rich I am? It's not like a billionaire can shelter all of his wealth from tax on its growth. He can only contribute $5,500 per year!
    – Daniel
    Commented Dec 4, 2015 at 15:24
  • 5
    I'm not quite following you there. First of all, I don't think you can contribute to both a traditional IRA and a Roth IRA at the max contribution level. Second, even if you could, how is all of his money tax free? That's still only $11,000 per year?
    – Daniel
    Commented Dec 4, 2015 at 15:27
  • 2
    And yes, the IRA limit is combined, forgot about that.
    – Joe
    Commented Dec 4, 2015 at 15:30
  • 1
    Distribution end wouldn't really work, though. A high earner in retirement might have much lower "income" - or could arrange to have much lower income in certain years (sell a bunch of stock on Dec. 31 and then use the next calendar year as a Roth year, etc.) very easily. Limiting contributions is simpler for both parties.
    – Joe
    Commented Dec 4, 2015 at 15:32
  • 2
    Note: SEP-IRA contribution limits are much higher. For the 2015/2016 tax year they are $53,000 or 25% of compensation, whichever is lower.
    – Peter K.
    Commented Dec 4, 2015 at 16:21

As all of these answers here are purely anecdotal and would be equally as anecdotal/uninformative no matter what the income limits were, you can alternatively write the IRS to ask their rationale. Similarly you can look for the law authorizing the IRS to modify income limits for the Roth IRA contribution privilege.

Typically the tax code is riddled with compromises based on a perceived inequalities on how the government levies taxes.

  • 7
    The IRS does not set these rules, Congress does. The IRS only implements/enforces them. If you want to ask somebody, ask a congress person or staffer. Commented Dec 4, 2015 at 17:56
  • 2
    @RossMillikan The IRS has wide latitude to interpret and clarify rules for anybody that asks. Congress has wide latitude to delegate any and everything to its agencies.
    – CQM
    Commented Dec 4, 2015 at 19:39

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