Correcting for Modified AGI on Your IRA

Your Modified Adjusted Gross Income (AGI) must be reported on your IRA to assure you are permitted to deposit the amount you have contributed. There are limits to how much you can contribute to both a traditional IRA, Roth IRA, or a combination of the two.

Modified AGI Consideration

As your income grows, you will be able to deduct less from your taxes each year with a traditional IRA. As of the tax year 2010:

  • If you have an employer plan, deductions are modified if your AGI is $55,000 or higher, and you cannot deduct if your AGI is over $66,000 ($109,000 for married filing jointly)
  • If you do not have an employer plan, deductions are modified if your combined AGI when married is over $167,000 and stopped at $177,000
  • For a Roth IRA, you cannot contribute if your individual AGI is greater than $120,000 ($176,000 for married filing jointly)

Correcting Excess Contributions

If you contribute too much, simply deduct the excess contribution from your account before you file your taxes in April. As long as the amount is withdrawn by then, you will not be subject to the penalty. Be certain to factor in the affect of any conversion into your AGI. Ask your accountant for assistance if you have converted an account this year.