The IRS recently announced its inflation-driven tax changes for 2020, and the IRA contribution limits are remaining the same. Individuals can contribute as much as $6,000 to their IRAs in 2020, with an additional $1,000 catch-up contribution allowed if the account owner is 50 or older.

However, the income limitations for Roth IRA contributions are changing. In 2020, savers will be able to contribute to a Roth IRA with a slightly higher adjusted gross income (AGI) than is allowed in 2019. With that in mind, here's a quick guide to the 2020 Roth IRA income limitations and what they mean to you.

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The 2020 Roth IRA income limits are rising

Unlike a traditional IRA, Roth IRAs are income-restricted for everyone, regardless of participation in an employer's retirement plan. For 2020, here are the income limits for Roth IRA eligibility

Tax Filing Status

2020 Roth IRA Full Contribution AGI Limit

Phase-Out Limit

Single or head of household

$124,000

$139,000

Married filing jointly

$196,000

$206,000

Married filing separately

$0

$10,000

Data source: IRS.

Here's what this means. If your AGI is below the full contribution limit (the center column), you can contribute as much as $6,000 to your Roth IRA in 2020, or $7,000 if you're 50 or older. If your AGI is greater than the full contribution limit but lower than the phase-out limit (the right column), you can make a partial contribution, which we'll go over in the next section. And finally, if your AGI is greater than the phase-out limit, you can't contribute to a Roth IRA in 2020.

For comparison, here are the limits from 2019:

Tax Filing Status

2019 Roth IRA Full Contribution AGI Limit

Phase-Out Limit

Single or head of household

$122,000

$137,000

Married filing jointly

$193,000

$203,000

Married filing separately

$0

$10,000

Data source: IRS.

In a nutshell, the income and phase-out limits for single and head-of-household filers have risen by $2,000, while the limit for married couples filing joint returns has increased by $3,000.

What if you're in the middle of the income range?

The ability to contribute to a Roth IRA doesn't simply disappear above a certain income level. Instead, it begins to phase out. So if you're in the middle of the income range that corresponds with your tax filing status, you can't make the full $6,000 (or $7,000) Roth IRA contribution in 2020, but you can make a partial contribution.

With that in mind, if your income is somewhere in the middle of the phase-out range, here's a quick list of steps to help you calculate your maximum Roth IRA contribution in 2020.

  • First subtract the full Roth contribution limit from your modified AGI on your tax return.
  • Next, divide this amount by $15,000 if you're single, head of household, or married filing separately and you didn't live with your spouse at any time during the year, or by $10,000 if you have any other filing status.
  • Then multiply by the maximum contribution limit. For 2020, this is $6,000 is you're under 50 and $7,000 if you've already reached your 50th birthday.
  • Finally, subtract this from the maximum contribution limit to determine your reduced contribution limit.

I know this may seem confusing, but it's easier than it sounds to work it out. Consider this example: Let's say you're single, 45 years old, and have ma odified AGI of $130,000 in 2020. Here's how you would determine your maximum Roth contribution for the year:

  • The income limit for a full Roth contribution is $124,000, so subtracting this from $130,000 gives $6,000.
  • Dividing $6,000 by $15,000 is 0.4.
  • Multiplying 0.4 times your maximum contribution limit of $6,000 equals $2,400.
  • Subtracting $2,400 from your maximum contribution limit gives your reduced Roth contribution limit of $3,600 for 2020.

The backdoor Roth IRA

Finally, it's important to mention that these guidelines apply to people who want to directly contribute money to a Roth IRA in 2020. If your income is too high based on the appropriate threshold in the table, that doesn't mean you can't put money into a Roth IRA -- it simply means you can't put money into a Roth IRA directly.

There's a loophole informally known as the backdoor Roth IRA contribution method. In a nutshell, while there is an income limit for contributing to a Roth IRA, there's no income limitation to convert a traditional IRA into a Roth IRA. So, if your income is too high to contribute to a Roth, you can contribute to a traditional IRA and immediately convert the account to a Roth IRA. If you've already claimed a tax deduction for these traditional IRA contributions, you may have some taxes to pay, but if you convert the account shortly after your contribution was made this shouldn't be an issue.

Check with a tax professional or financial advisor if you want to do this in order to make sure you're compliant with all IRS guidelines, but the point is that just because your income is too high, that doesn't necessarily mean you can't have a Roth IRA.