I realize that asking for information from a general-interest forum is not the ideal way to get all pertinent details, but I was hoping that someone might be able to shed some light something I came across.
I finished my taxes for this year, and since I’m getting married in…holy crap, we’re down to five weeks left :eek:. Um, anyway, I’m getting married in March, so I decided to run some “what-ifs” through turbotax to get an idea how things will look for us next year.
We wanted to compare our tax liability filing married jointly vs. separately. Since we don’t have too many complications in our financials, it did end up being more advantageous to file jointly. But that’s not my question.
In the course of doing my “married filing separately”, Turbotax pointed out that I was over my IRA contribution limit. Some digging around in the IRS site brought up this publication that states that if you are married and filing separately, and you lived with your spouse during the year, and your Adjusted Gross Income is over $10,000, you can not contribute to a Roth. And if you did, you have to remove the contribution or pay an excise tax.
My question is: why? AIUI, contributions to a Roth IRA has no impact on taxable income so why does filing status affect the contribution limits? Is it to prevent people from contributing beyond the regular limits by shifting income between spouses? I see that singles can make the full Roth contribution if they have AGI < $99k, while for married jointly only if total AGI < $156k. So I suppose if one person made more than $99k and the other made less, without this restriction they could theoretically “shift” income (not wages, but maybe earned interest, investment returns, etc) to the lower earner to let the higher earner make a full contribution. But why such a low income level for filing separately? My first guess would’ve been that the income level for filing separately would be half the joint amount.
Again, I only came across this during a “what if” scenario. I’m filing as single this year, and we’re going to be filing married-jointly next year. If the above scenario was going to actually apply to me, I’d definitely be going to a financial and/or tax expert. But since I’m just trying to wrap my head around some (seemingly) inane IRS stipulations, I thought the SDMB could provide some information.