A Roth IRA differs from the traditional IRA in that it has no tax deductions unlike the latter. However, it enjoys benefits that are unique to it and therefore set it apart from all the other retirement plans. To determine whether or not one can benefit from it and if so how one can benefit, it’s key to consider the limits of Roth IRA.

In speaking of Roth IRA limits, one is considering two categories of limitations that are key in determining who can benefit from a Roth IRA and by how much. On the one hand is the income/compensation limits and on the other is the contribution limits.

Income Limits

The law limits the people who can benefit from Roth IRA by setting up a maximum income limit. This means that anyone earning beyond the given maximum income is ineligible to make Roth contributions. Certain people are only eligible for reduced contribution. This is determined according to certain income thresholds known as phase-out limits.

Income limits are categorized differently according to the filing status of the individual and the kind of contribution one is legible to make. Filing status is about whether one is filing as a single person/the head of a household, or if a married couple is filing jointly or if a married couple is filing separately. The kind of contribution one is making refers to whether one is eligible for a full contribution or a reduced contribution.

In 2010, the income limit for a single person or the head of a household eligible for a full contribution was $105,000. For those eligible for a reduced contribution, it was between $105,001 and $120,000.

For a married couple filing jointly who are eligible for a full contribution, the income limit was $166,000 and between $166,001 and $176,000 for a reduced contribution.

For a married couple filing separately where they had lived together for any amount of time, the limit for a full contribution was $0, while the limit for a reduced contribution was $10,000.

Contribution Limits
The second category of limits refers to the amount of contributions a person is eligible to make in a certain year. This is determined by two factors. One is the age of the person and the other is the income limit as discussed above.

The cut-off age, so to speak, is 50 years old. This is determined at the end of the year for which the contribution limit is being made. If by the end of that year the person is 50 years old or older, then they are entitled to an additional contribution called catch-up contribution.

The income limits as discussed above will affect the contribution limits because they determine whether or not a reduced contribution is applicable to the person in question.

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