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Author: ltangel Two stars, 250 posts Add to my Favorite Fools Ignore this person (you won't see their posts anymore) Number: of 75776  
Subject: roth question Date: 10/7/2011 7:05 PM
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is royality income(from book)able tobe used asa Roth contribution/JUst wondering -thanks inadvance
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Author: BruceCM Big red star, 1000 posts Old School Fool Add to my Favorite Fools Ignore this person (you won't see their posts anymore) Number: 69648 of 75776
Subject: Re: roth question Date: 10/7/2011 8:31 PM
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Unless Royalty income is part of business inome it would not be earned income, thus would not be income that could be contributed to an IRA or other retirement plan

BruceM

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Author: rainphakir Big red star, 1000 posts Old School Fool Add to my Favorite Fools Ignore this person (you won't see their posts anymore) Number: 69649 of 75776
Subject: Re: roth question Date: 10/9/2011 9:19 PM
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Does one not pay tax on royalty income?

If taxes are paid, the income claimed on a 1040 form can potentially be contributed to an IRA, traditional or roth.

The criteria is: '
is the income taxable?'

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Author: CABob Big gold star, 5000 posts Old School Fool Add to my Favorite Fools Ignore this person (you won't see their posts anymore) Number: 69650 of 75776
Subject: Re: roth question Date: 10/9/2011 10:32 PM
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If taxes are paid, the income claimed on a 1040 form can potentially be contributed to an IRA, traditional or roth.

The criteria is: '
is the income taxable?'

I don't think this is correct. Income from interest, dividends, and capital gains is certainly taxable, but, is not earned income that can be contributed to an IRA.
I don't know about royalty income, but, I suspect it is not earned income in most cases.

Bob

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Author: intercst Big funky green star, 20000 posts Top Favorite Fools Top Recommended Fools Feste Award Nominee! Old School Fool Add to my Favorite Fools Ignore this person (you won't see their posts anymore) Number: 69651 of 75776
Subject: Re: roth question Date: 10/10/2011 7:34 AM
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CABob; writes,

<<<If taxes are paid, the income claimed on a 1040 form can potentially be contributed to an IRA, traditional or roth.

The criteria is: '
is the income taxable?'>>

I don't think this is correct. Income from interest, dividends, and capital gains is certainly taxable, but, is not earned income that can be contributed to an IRA.
I don't know about royalty income, but, I suspect it is not earned income in most cases.

</snip>


In general, the test is that only income you pay FICA taxes on can be used as an IRA contribution.

intercst

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Author: AcmeFool Big gold star, 5000 posts Old School Fool Add to my Favorite Fools Ignore this person (you won't see their posts anymore) Number: 69652 of 75776
Subject: Re: roth question Date: 10/10/2011 12:29 PM
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The criteria is: '
is the income taxable?'


This is incorrect. The criteria is: "Is the income earned?"

Dividends are taxable, but since they are not earned they do not establish eligibility to contribute to an IRA.

Acme

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Author: ptheland 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: 69653 of 75776
Subject: Re: roth question Date: 10/10/2011 1:54 PM
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Does one not pay tax on royalty income?

Yes, you do.

If taxes are paid, the income claimed on a 1040 form can potentially be contributed to an IRA, traditional or roth.

The criteria is: '
is the income taxable?'


Sorry, no. That is not correct.

To be able to make an IRA contribution, the income must be earned. Interest, dividends, capital gains, and real estate rents all generate taxable income. But none of them will allow you to make an IRA contribution. Earned income is wages (on a W-2), or self employment income, often found on schedule C or F, and sometimes from your interest in a partnership.

--Peter

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Author: JAFO31 Big gold star, 5000 posts Old School Fool Add to my Favorite Fools Ignore this person (you won't see their posts anymore) Number: 69654 of 75776
Subject: Re: roth question Date: 10/10/2011 4:26 PM
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rainphakir: "Does one not pay tax on royalty income?

If taxes are paid, the income claimed on a 1040 form can potentially be contributed to an IRA, traditional or roth.

The criteria is: '
is the income taxable?' "


Probably greek, but this is just so wrong that I had to write as sson as I read it.

Regards, JAFO

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Author: BruceCM Big red star, 1000 posts Old School Fool Add to my Favorite Fools Ignore this person (you won't see their posts anymore) Number: 69655 of 75776
Subject: Re: roth question Date: 10/11/2011 2:17 PM
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In general, the test is that only income you pay FICA taxes on can be used as an IRA contribution

This is 'generally' true. However, there are some interesting exceptions that come to mind....

1. Alimoney
2. Net Self employment income that is less than $433.
3. Income earned by a son or daughter under age 18
4. Earned income of certain clergy and members of qualifying religious sects.
5. Income earned by temporary (non-career) student workers

I'm sure there are other categories of earned income that is not subject to FICA tax but would be eligible to be contributed to an IRA...I just can't think of any others right now.

But while on this topic, perhaps someone here might know....deferred compensation for a retired person, although it appears in box 1 of their W2, does not qualify as earned income for IRA contribution purposes. However, employer contributions to a deferred comp plan, when they vest to the former employee, are subject to FICA tax. Examples might include NQ stock options that are exercised or phantom stock. Because FICA tax is payable on the income portion of the deferred comp, would this then be eligible for IRA contribution?

BruceM

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Author: ltangel Two stars, 250 posts Add to my Favorite Fools Ignore this person (you won't see their posts anymore) Number: 69656 of 75776
Subject: Re: roth question Date: 10/13/2011 9:58 AM
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wowo -- more involved than I thought -thanks for all the insights from eveyone!!

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