Roth IRA contributions

Anyone who has received taxable compensation can contribute. A spouse without taxable compensation may be entitled to open a spousal IRA (see below).

Examples of taxable compensation include:

• Wages
• Tips
• Commissions
• Taxable alimony
• Separate maintenance payments
• Salaries
• Professional fees
• Bonuses
• Self-employment income
• Combat zone pay
• Certain taxable non-tuition fellowship and stipend payments that were paid to aid in the pursuit of graduate or postdoctoral study (beginning with tax year 2020)

To make a spousal contribution, the couple must file a joint tax return. Any limits to the amount of the contribution are determined based on the couple’s combined modified adjusted gross income (MAGI).

A spouse’s contribution limit is the same as the maximum contribution limit listed above. The couple’s combined contribution amount cannot exceed 100% of their combined taxable compensation. 

Form 5498 is mailed by May 31, after the tax-filing deadline. Investors are not required to file Form 5498 with their tax return. If your client needs documentation of their current tax year’s contributions for their tax advisor, it can be found under the Transaction History section of the advisor website. Investors can also access their transaction history on the investor website.

An investor may reinvest all or part of a Roth IRA distribution as a rollover back into their IRA within 60 calendar days of the date of receipt. Only one rollover per owner is allowed per consecutive-12-month period. After 60 days, the reinvestment is considered a personal contribution, subject to Roth IRA limits and deadlines. Review the IRA incoming transfer and rollover guide for additional information on this type of move, eligible assets and when the investment can be processed without a sales charge.

Yes, direct investments are not permitted for American Funds U.S. Government Money Market Fund in Class C shares. F shares of all funds are restricted, unless the firm has an agreement with Capital Group.