Roth IRA

Roth IRA rules

Roth IRA rules differ from other IRA rules including traditional IRA rules and SEP IRA rules in some aspects. There are also many aspects of Roth IRA rules that are shared with other IRA rules.

The main difference between a Roth IRA and other types of IRAs such as traditional IRA and SEP IRA is the tax benefits of Roth IRA. Roth IRA offers tremendous tax benefits since Roth IRA allows the Roth IRA owner to pay taxes on the Roth IRA contributions now and not have to pay any more taxes when making Roth IRA withdrawals. Because of this Roth IRA benefit, Roth IRAs are not offered to every tax payer.

Roth IRA rules that are the similar to other IRA rules include contribution limits.

• Your Roth IRA contributions are not tax deductible.

   

• Your Roth IRA Investment gains are tax-free if qualified withdrawals are made from the Roth IRA.

   

• Minimum withdrawals are not required from a Roth IRA when you turn 70½.

   

• Roth IRA contributions can continue after age 70 1/2.

   

• Roth IRA distributions must be made at death.

   

• Your Roth IRA must be kept separate from other IRAs. IRA Rollovers are allowed from one Roth IRA to another Roth IRA.

   

• Traditional IRA may be converted to Roth IRA if the tax on the taxable IRA distribution is paid.

   

• Roth IRA contributions and traditional IRA contributions are combined and the total IRA contributions must not exceed IRA contribution limits.

   

• The aggregate of your contributions to Roth and non Roth IRAs (not including the Educational IRA) cannot exceed the IRA contribution limits.

   

• There are income phaseout limitations for Roth IRA contributions.

   

• Qualified Roth IRA withdrawals are not reported as ordinary income and will not affect your Adjusted Gross Income (AGI).