Omar is single,age 46,and reported AGI of $124,000 in tax year 2016.He is an active participant in his employer's pension plan.What is the maximum Roth IRA contribution he can make in 2016?

Question

Quizplus · Accepted Answer

Since Omar is an active participant in his employer's pension plan, his contribution limit for a traditional IRA is reduced based on his income level. According to the IRS, in 2016, single filers with AGI between $118,000 and $133,000 can only contribute a reduced amount to a traditional IRA, and no longer qualify for a Roth IRA contribution. The reduced amount for Omar is calculated as follows: 
- Subtract the income threshold for reduced contributions ($118,000) from Omar's AGI: $124,000 - $118,000 = $6,000. 
- Divide the result by the income range for reduced contributions ($15,000): $6,000 / $15,000 = 0.4 
- Multiply the maximum yearly contribution limit ($5,500) by the decimal just calculated: $5,500 x 0.4 = $2,200 
Therefore, the maximum Roth IRA contribution Omar can make in 2016 is $2,933 (i.e. $5,500 - $2,200).

Omar Is Single,age 46,and Reported AGI of $124,000 in Tax