What are the Roth IRA eligibility rules?


Anyone who receives stable taxable income may open and start funding a Roth IRA account.

However, the amount of contribution that can be made to each individual account depends on the tax-filing status of the individual. There are also some eligibility requirements that need to be met on order for Roth IRA distributions to qualify as non-taxable.

Eligibility Rules for Roth IRA

  • In order for your Roth IRA distributions to be received completely free of income tax, you must have held a Roth IRA account for at least five years. Besides, the following requirements must be met:
    • The individual must be age 59.5 or older;
    • The individual has a disability;
    • Distributions are paid in the form of a death benefit to the Roth IRA holder's estate or beneficiary after the individual's death;
    • The Roth IRA distributions are used by first-time home-buyers to help with the expenses.
  • The Roth IRA holder's compensation must come from salaries, wages, commissions, and bonuses, if the individual works for an employer. If you are self-employed or are a partner in a partnership, your compensation must come from your net earnings from your business reduced by 50% of your self-employment taxes. Alimony is also considered eligible compensation. Rental income or profits from property and investment in interest and dividends are not eligible income sources for being contributions to a Roth IRA.
  • For tax year 2009 Roth IRA holders under age 50 are allowed to contribute a maximum of $5,000. Individuals over age 50 can make additional catch-up contributions of up to $1,000.
  • The modified adjusted gross income (MAGI) of Roth IRA owners who want to make the maximum contributions possible, must not exceed certain limits. Individuals who are married and file a joint tax return must have a maximum MAGI of $166,000. For single individuals who file a separate tax return the MAGI limit is $105,000.
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