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Author: aj485 Big gold star, 5000 posts Feste Award Nominee! Old School Fool Add to my Favorite Fools Ignore this person (you won't see their posts anymore) Number: of 76235  
Subject: Re: Roth IRA and Married Filing Separately Date: 12/26/2013 12:45 PM
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Does anyone know if the limit on Roth IRA contributions within the married filing separately tax status (which is $0, I believe, for income over $10,000) is retroactive? If I contribute the maximum Roth contribution on January 1st of a given year, then get married on, say, December 31st of that same year and subsequently file my taxes married filing separately, what, exactly, happens?

Well, your marriage status as of Dec 31 affects how you can file for the entire year, so it's not really that it's 'retroactive'. Given the circumstances you provide, if your MAGI is over $10k and you file married, separately, any Roth contribution made for that tax year would be considered excess. To fix the issue, you can recharacterize the contribution to an after-tax Traditional IRA, you can take the appropriate share of the money (needs to be calculated by the custodian) out of the account and pay penalties on the gains removed, or you can pay a 6% excess contribution tax for every year the money remains in the account until you are eligible to contribute to a Roth account again.

I ask this due to my unique position where my student loan payments are based on my income (and the income of my spouse if filing jointly), and there are severe repercussions to filing married jointly, which would add a huge financial burden to our household.

I assume that you have lower payments based on your income alone because of an income-based repayment plan for your student loans? Don't forget, in addition to the limits on contributing to a Roth account when filing separately, you will also lose the ability to deduct student loan interest when filing separately. See IRS Pub 970 http://www.irs.gov/pub/irs-pdf/p970.pdf for details.

You should also look at if you will end up paying significantly more in taxes, since the bracket limits for married filing separately are not as favorable as either single or married filing jointly, especially when there is a disparity in income.

AJ
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