Modified adjusted gross income for Roth IRA purposes is adjusted gross income as reported on your tax return, with certain modifications. From your adjusted gross income you subtract any income resulting from the conversion of another IRA to a Roth IRA, and then add back certain adjustments to income, including a deduction for contributions to a traditional IRA, the student loan interest deduction and tuition and fees deduction, any foreign earned income exclusion and foreign housing exclusion or deduction (Form 2555), the exclusion of qualified bond interest (Form 8815), and the exclusion of adoption benefits provided by your employer (Form 8839).
Amount of Contributions
The amount you can contribute to a Roth IRA depends on the limits on modified adjusted gross income, as described above, and also depends on whether you are making contributions only to a Roth IRA or to both a Roth IRA and a traditional IRA. If you make contributions to both, your contribution to your Roth IRA is limited to the lesser of:
The limit for Roth IRAs, based on your modified adjusted gross income and filing status, minus all amounts you contribute to IRAs other than Roth IRAs, or
Your taxable compensation minus all contributions to IRAs that are not Roth IRAs.
Contributions your employer makes to a SEP or SIMPLE IRA plan are not taken into consideration in calculating this limitation on your Roth IRA contributions.
There are worksheets in IRS Publication 590 that will help you calculate the amount you can contribute when you are subject to a limitation because you have contributions to other types of IRAs, or because your modified adjusted gross income is over the amount allowable for the maximum contribution, but is still within the range allowable for phase-out of the contribution (less than the ceiling amount).
If You Contribute Too Much
There is a 6% excise tax on excess contributions. Excess contributions include the total of the amount by which your current year contributions exceeded the applicable limits, as described above (maximum contribution according to filing status and modified adjusted gross income, less contributions to other IRAs), plus any excess contributions from the preceding year, reduced by any distributions you received from your Roth IRA during the year, and also reduced by your contribution limit for the year less contributions to other IRAs.
If you contribute more than the allowable amount to your Roth IRA one year, you can apply the excess contributions to a later year, when your contributions are less than the maximum allowable.
Excess contributions do not include amounts that are properly rolled over from a Roth IRA or converted from a traditional IRA.