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What are the Roth IRA rules?

Kay Bell, Bankrate.com

Retirement accounts get added attention during tax-filing season. That's because you must put money in an individual retirement account no later than the April return-filing deadline to get credit for the prior year. It doesn't matter whether your contribution is to a traditional IRA or a Roth IRA.

If you opt for a Roth account, you won't get an immediate tax break, but you won't pay any tax on your money when you eventually take it out. The Internal Revenue Service, however, has specific rules on just who can have a Roth IRA and how much money can be contributed each year. Contribution limitsIn general, Roth contributions are the same as traditional IRAs. For 2009 tax purposes, contributions of up to $5,000 are allowed.

If you were 50 years old or older last year, you're allowed to contribute an extra $1,000. That means older IRA holders can put in a total of $6,000 for 2009.

The contribution amounts for regular and catch-up contributions are the same for the 2010 tax year.

However, regardless of IRS limits, you can't put more money than you make in any IRA. So if your income is only $1,500, then $1,500 is the most you can contribute to a Roth.

Income limitsSpeaking of income, you must earn money to open any IRA. That means, if your only income is from unearned sources, such as investments, you cannot contribute to an IRA. You must get paid wages, a salary, tips, professional fees or bonuses.

There is an exception that allows Roth accounts for nonworking spouses. If you and your spouse file a joint return but one does not work, the employed spouse can open and contribute to a Roth IRA for the unemployed partner.

Generally, the contribution limits for a spousal IRA are the same as for the account held by the working wife or husband. IRS Publication 590, "Individual Retirement Arrangements," has complete guidelines on opening a Roth spousal IRA.

However, know that if you make too much money, you're not eligible to open a Roth or to contribute to the account you opened when you were earning less. For a Roth, your earned income -- with some deductions you might have taken, such as for student loan interest, added back in -- must meet certain criteria.

You have until April 15 to make contributions to your Roth and have them count toward the 2009 tax year. If you've already done so for last year and now want to contribute for 2010, the income limits are $177,000 for married joint filers; $120,000 for single taxpayers; and $10,000 for married couples filing separately.

And even if you're not quite at the top of these pay ranges, your Roth contribution could be limited if your modified adjusted gross income falls within certain limits.

You still can add to your Roth in these cases, but not the full allowable amount. Publication 590 contains work sheets and examples to help you determine your reduced Roth IRA contribution amount.

Age limitsThere is no age limit for Roth accounts. Whereas traditional IRA contributions are barred for individuals older than 70½, you can be any age and still contribute to a Roth IRA.

And you can leave money in your Roth for as long as you live. The IRS doesn't require minimum distributions from Roths as it does with traditional IRAs.

If you find a Roth is the right IRA for you, you have until the tax-filing deadline of April 15 to open one or contribute to your existing account and have it count toward the prior year's limit. After that, the money will be counted as a contribution in the next filing season.

For complete information on Roths and definitions of terms, check out IRS Publication 590, "Individual Retirement Arrangements."