Rules Which Apply to Married Couples
Many people wonder how the Roth IRA rules and regulations change when they get married and what happens when filing jointly or separately. These are important questions to ask, and the answers must be understood. Your Roth IRA account is one of the most powerful tools when planning for retirement and still considered the best IRA choice, so it is very important that you know and understand how things work.
Married and Filing Separately or Jointly?
The first thing to consider for married couples with a Roth IRA is the IRA contribution limits. In 2009, if the married couple files their taxes jointly, they can only have a combined AGI of $176,000. If the amount is higher, you will not be allowed to make further contributions to your Roth IRA. Some people believe they can avoid this by filing separately, even if they are married. This will not solve the problem. In this case, the married individual that is filing separately can only make contributions to the Roth IRA if the modified adjusted gross income does not exceed $10,000. The IRA limits are so low because the government wants to deter married couples from filing separately. If this situation arises, you cannot do anything about any contributions that were made in previous years, but you will be required to remove any contributions that were made in 2009.
Good News for Marriages When Filing Jointly
While this may cause some panic for some, there is some good news. The money in the IRA can be shifted. This means that you can take the Roth IRA and convert it to a Traditional IRA. As long as this change is made before the deadline to file your taxes, the law will look at it as though the money had been originally contributed to the Traditional IRA.
The benefit of making this conversion is that here is no income limit when making contributions to a traditional IRA account. If you adored this article and you would certainly like to obtain even more info relating to married couples have to file taxes together in Canada kindly check out the web-page. However, your income may play a role in determining whether the contributions can be deducted from your taxes. Current rules allow money to be rolled over into a traditional IRA from a Roth during the years that your AGI is under $100,000. This applies to single and married individuals.
Be aware that the $100,000 limit will not be present in 2010. When this occurs, the money can be rolled over from the traditional account into a Roth IRA. This will allow you to benefit from the tax-free income the account will generate from her on. You will be required to pay taxes when the conversion is made. Since you did not deduct the money when you converted to the traditional IRA account, you will not be required to pay taxes on the amount that was in the account during the same year it was converted.
If you realize that you will have changes to your AGI, it may be a wise idea to consider a conversion. This will allow you to continue to make contributions to an IRA. In 2010, when the limits are lifted, you can change the IRA account back to the way it was. Roth IRAs have tremendous benefits, but they may not be the right option for you at this time.