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How does the $95,000 income limit for Roth IRA contributions get calculated?

My specific problem is that my gross income may be over 95K this year (depending on bonuses and raises). However, I am making a 10K contribution to my 401K at work. Does this 10K get subracted from my Roth IRA income limit?

If this is going to be a problem, I already made my 2005 Roth contriubtion of 4K. What happens - does my bank make me put the 4K into a traditional IRA?

The calculations for the $95K limit can be found in Publication 590. It is based on your modified adjusted gross income. You would take your AGI on line 37 of your 1040 and then add in certain deductions and exclusions. The details are on page 54 of Pub. 590. Your 401k contribution will lower your AGI.

If your MAGI exceeds the income limits for a Roth contribution, you can recharacterize it to a traditional IRA. Since you can wait until April of next year to recharacterize, you could wait until your file your 2005 tax return to see if you really did exceed the income limits.

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