Example
You are a single individual with taxable compensation of $120,000. You want to
make the maximum allowable contribution to your Roth IRA. Your modified AGI is
$107,000. You have not contributed to any traditional IRA, so your
contribution limit before the modified AGI reduction is $4,000. Using the 5 steps
used to figure your reduction, you figure your reduce Roth IRA contribution of
$2,400.00 as
follows.
- Modified AGI= $107,000
- If your filing status is Single, then use $99,000 (2007)
- Subtract line 2 ($99,000) from line 1 ($107,000) = $8,000
- Enter $15,000 ($114,000 - $99,000 for Single filers)
- Divide line 3 ($8,000) by line 4 ($15,000) = 0.53333 round to 0.533
- Enter $4,000 (or $5,000 if over age 50)
- Multiply line 5 by line 6 = $2,132 (or $2,665 if over age 50)
- Subtract line 7 from line 6 = $1,868 (or $2,335 if over age 50).
Round the result up to the nearest $10. If he result is less than
$200, enter $200).
- This is your reduced Roth IRA contribution limit = $1,868 (or $2,335 if
over age 50).
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