Understanding Roth IRA Income Limits: What Changed Between 2019 and 2020

The IRS maintains strict rules about who can contribute to a Roth IRA, and these rules change annually based on inflation adjustments. For those saving for retirement, understanding Roth IRA income limits is essential to determining whether you can fund one of these accounts and how much you’re allowed to contribute. The good news is that the general contribution ceiling—$6,000 per year, or $7,000 if you’re 50 or older—remained stable in 2020. However, the income thresholds that determine your eligibility shifted upward, opening doors for higher earners to participate in this tax-advantaged savings vehicle.

What Are the Roth IRA Income Limits? A Year-by-Year Comparison

Unlike traditional IRAs, Roth accounts have income restrictions that apply universally, regardless of whether you participate in an employer-sponsored retirement plan. This means even affluent individuals face eligibility hurdles when it comes to direct contributions.

For 2020, the IRS expanded the income windows across all filing statuses. Single filers and those claiming head-of-household status saw their full contribution threshold increase by $2,000, while married couples filing jointly gained a $3,000 boost compared to 2019. Specifically:

Full Contribution Range (where you can deposit the maximum):

• Single/Head of Household: $124,000–$139,000 (up from $122,000–$137,000 in 2019)
• Married Filing Jointly: $196,000–$206,000 (up from $193,000–$203,000 in 2019)
• Married Filing Separately: $0–$10,000

Phase-Out Range (where partial contributions apply):

• Single/Head of Household: $124,000–$139,000
• Married Filing Jointly: $196,000–$206,000

If your adjusted gross income (AGI) falls below the full contribution threshold, you can contribute the maximum. Should your AGI exceed the phase-out limit, direct contributions are off the table for that tax year.

When Your Income Falls in the Middle: Calculating Partial Contributions

Not everyone sits neatly below or above the income cutoffs. If your AGI lands somewhere in the middle—within the phase-out range—you can still contribute to a Roth IRA, just not the full amount. This partial contribution calculation involves several steps:

Step-by-step calculation:

1. Subtract the full contribution income threshold from your modified AGI
2. Divide the result by $15,000 (if single, head of household, or married filing separately and living apart from spouse) or $10,000 (for other filing statuses)
3. Multiply this decimal by your maximum allowable contribution ($6,000 if under 50, $7,000 if 50 or older)
4. Subtract the result from your maximum contribution limit to find your reduced limit

Practical example:

Imagine you’re single, age 45, with a modified AGI of $130,000. Here’s how you’d calculate your allowable Roth IRA contribution:

• Full contribution limit for your status: $124,000
• Excess over limit: $130,000 – $124,000 = $6,000
• Calculation: $6,000 ÷ $15,000 = 0.4
• Contribution reduction: 0.4 × $6,000 = $2,400
• Your maximum Roth IRA contribution: $6,000 – $2,400 = $3,600

While the math may seem intricate, breaking it into individual steps makes it manageable. This calculation ensures the IRS gradually reduces your contribution capacity as income rises through the phase-out window.

Bypassing Income Restrictions: The Backdoor Roth Strategy

If your income surpasses the phase-out limit entirely, direct contributions aren’t permitted. However, this doesn’t mean you’re locked out of Roth IRA benefits altogether. A strategy known as the backdoor Roth IRA contribution provides a workaround.

Here’s how it functions: While the IRS restricts direct contributions based on income, there’s no income ceiling for converting a traditional IRA into a Roth IRA. Therefore, if you can’t contribute directly to a Roth due to high earnings, you can:

1. Contribute to a traditional IRA (no income limits apply here)
2. Immediately convert that traditional IRA into a Roth IRA

If you haven’t claimed tax deductions on the traditional IRA contributions, the conversion typically incurs no additional tax liability. If you have claimed deductions previously, you may owe taxes on the converted amount, though executing the conversion promptly after contribution minimizes this exposure.

Important caveat: The backdoor Roth strategy involves tax implications that vary based on individual circumstances. Before implementing this approach, consult with a qualified tax professional or financial advisor to ensure full compliance with IRS regulations and to understand your specific tax consequences.

The Bottom Line

Whether you’re building a diversified retirement portfolio or maximizing tax-free growth through a Roth IRA, understanding income limits is crucial. The 2020 adjustments made Roth IRA contributions accessible to a broader income range compared to 2019, but the rules remain complex for those in the middle. If your income qualifies for full contributions, take advantage of the $6,000 (or $7,000 if 50+) annual allowance. If you’re in the phase-out zone, use the calculation method to determine your exact contribution capacity. And if you’re above the threshold entirely, the backdoor Roth IRA strategy may provide the solution you’re seeking—with proper professional guidance, of course.