For the most part, you need earned income to put money in a Roth, or any, IRA. However, if you are divorced and receiving alimony, you can still contribute. You can also fund an account if your spouse files taxes jointly and her adjusted gross income is greater than the IRA yearly contribution limit.
IRA Yearly Contribution Limit
The Internal Revenue Service limits how much you can put in an IRA each year. As of 2012, the limit is $5,000, or $6,000 for account holders 50 and older. As of 2013, the limit rises to $5,500, or $6,500 for IRA owners 50 or older.
The IRS defines earned income to include wages, salaries, tips, commissions and non-taxable combat pay. Alimony and separate maintenance payments are also included. You cannot contribute money from pensions, insurance, unemployment benefits, investments or rents to an IRA.
You cannot contribute more to an IRA than you earn for the year. How little you can put in when you open an account depends on your financial institution. Some credit unions allow you to open an IRA with as little as $25. Once the account is open, you can put in $5 in a year during which you make no more than $5.
If your spouse has earned income and the two of you file taxes jointly, you can contribute to an IRA as long as your spouse's income is large enough for each of you to contribute. As of 2012, for example, if both spouses are younger than 50 -- keeping in mind that $5,000 is the yearly limit -- the spouse must earn at least $10,000 ($5,000 X 2) for each spouse to contribute the maximum. If one spouse is 50 or older, the earnings would have to be $11,000 ($5,000 + $6,000) for both to contribute to the limit. For married couples filing jointly, eligibility to contribute to a Roth phases out at AGI of $183,000 as of 2012. The limit goes up to $188,000 in tax year 2013.
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