The Roth IRA and its income phase out

How it works

A person with earned income can contribute up to $7,500 (2026, verified on the official page) a year, and that cap is shared with any traditional IRA contribution in the same year. The ability to contribute directly begins to shrink when modified adjusted gross income passes this year's official roth ira phaseout single start (not yet verified here; see the official source below) for a single filer or this year's official roth ira phaseout married start (not yet verified here; see the official source below) for a married couple filing jointly, and it reaches zero a set distance above those lines. Contributions can be withdrawn at any time with no tax or penalty, since they were already taxed. Earnings come out tax free once the account has been open five years and the owner is 59 and a half, and come out with tax and usually a penalty before then. A contribution above what income allows is an excess contribution with a 6 percent yearly tax until it is removed.

What it gives

Qualified withdrawals, including decades of growth, carry no federal income tax.

Contributions can be taken back out at any age without tax or penalty.

No required distributions during life, so the account can sit untouched or pass to heirs.

What it costs, or where the catch is

There is no deduction, so the paycheck or checking account bears the whole contribution.

A raise or bonus late in the year can push income past the line and turn a contribution into an excess.

The five year clock starts with the first contribution, which matters for a person who opens one late.

A worked example

June is 29, single, earns $62,000, and puts $250 a month into a Roth IRA, which is $3,000 a year. She is below the phase out, so the full amount is allowed. If she keeps this up for 35 years at a 7 percent return, the account reaches roughly $415,000, of which $105,000 is contributions and about $310,000 is growth, and all of it comes out tax free after 59 and a half.

Where it goes wrong

The common miss is contributing in January, getting a raise or a bonus that pushes income over the line, and leaving the excess in the account to accrue the 6 percent tax year after year.

Who confirms it for you

For your own numbers, a CPA or enrolled agent. This page explains how the rule works for people in general; it does not know your situation and does not tell you what to do.

The official source

IRS: Roth IRAs. Every figure that changes by year comes from the site's rules table, which the watcher checks against the official page on a schedule; where a figure is not yet verified, this page says so instead of printing a number.