Roth IRA rules you should know during tax season — and all year long

Contribution Rules - Individuals with earned income can open a Roth IRA, but contributions cannot exceed their earned income, with a maximum of $7,500 ($8,600 for those aged 50 and over) in 2026 [1][2] - The maximum contribution limit varies by age, allowing catch-up contributions for individuals aged 50 and older [2] Tax Benefits - Roth IRAs offer tax-free growth and withdrawals in retirement, contrasting with traditional IRAs that provide immediate tax deductions but tax liabilities upon withdrawal [4][5] - Contributions to a Roth IRA are made with after-tax dollars, meaning they cannot be deducted from taxable income [6] Income Limits - Roth IRAs impose income limits for contributions, with eligibility based on modified adjusted gross income (MAGI) [7][8] - Individuals earning above certain thresholds may be ineligible to contribute directly to a Roth IRA, but can make partial contributions if their income falls within specified ranges [9] Backdoor Roth IRA - A backdoor Roth IRA allows individuals exceeding income limits to contribute by first making a nondeductible contribution to a traditional IRA and then converting it to a Roth IRA [13][19] - The IRS pro rata rule applies to conversions, affecting the taxability of the converted amount based on the proportion of pre-tax and after-tax funds in traditional IRAs [16][18] Withdrawal Rules - Roth IRAs allow tax-free withdrawals of contributions at any time, while investment earnings may incur taxes and penalties if withdrawn before age 59½ [20] - There are no required minimum distributions for Roth IRAs, allowing funds to grow tax-free for an extended period [20] Tax Season Incentives - Contributions to Roth IRAs can be made until the tax filing deadline for the previous year, providing flexibility for taxpayers [20]