Learn how Roth IRA contributions, income limits, withdrawals, five-year rules, conversions, excess contributions and California taxes work.
A Roth IRA is an individual retirement arrangement funded with after-tax money. Contributions are not deductible, but qualified distributions are generally free from federal income tax. The owner is not required to take lifetime required minimum distributions from a Roth IRA.
The account's favorable result depends on following contribution, conversion, investment, distribution, and recordkeeping rules. "Roth" describes the tax treatment of the account, not a particular investment or a guarantee of growth.
A regular contribution generally requires taxable compensation. A spousal IRA rule can support a contribution on a joint return when one spouse has little or no compensation and the couple has sufficient combined compensation.
For 2026, the combined contribution limit across all of a person's traditional and Roth IRAs is generally $7,500, or $8,600 at age 50 or older, limited further by taxable compensation.
Direct Roth contribution eligibility is also limited by modified adjusted gross income. For 2026, the phaseout range is:
Below the applicable range, the full limit may be available. Within it, the contribution is reduced. At or above the upper limit, no regular direct Roth contribution is allowed. These amounts change and should be reviewed annually.
Morgan, age 42, has sufficient compensation and contributes $3,000 to a traditional IRA for 2026. Before considering the Roth income phaseout, no more than $4,500 of the shared $7,500 limit remains for a Roth IRA.
If Morgan's modified AGI falls within the Roth phaseout range, the permitted Roth contribution may be lower than $4,500. If Morgan contributes too much, a 6% excise tax may apply for each year the excess remains unless it is timely corrected under the applicable rules.
Roth IRA dollars can come from several sources:
These categories have different rules. A Roth conversion is not a regular annual contribution and is not barred by the direct-contribution income limit. However, the conversion generally creates taxable income to the extent it represents pre-tax money. Form 8606 and the traditional IRA pro rata rule are central to the calculation.
A "backdoor Roth" generally describes making a nondeductible traditional IRA contribution followed by a Roth conversion. The phrase is not a separate account type, and existing pre-tax traditional, SEP, and SIMPLE IRA balances can make much of the conversion taxable.
A qualified Roth IRA distribution is generally tax-free when it occurs after the applicable five-tax-year period and is made:
When a nonqualified distribution occurs, federal ordering rules generally treat amounts as coming out in this order:
Because regular contributions come out first, a withdrawal can be nontaxable even when it is not a qualified distribution. That does not mean every early Roth withdrawal is tax- and penalty-free. Conversion amounts and earnings require additional analysis.
The original Roth IRA owner generally has no lifetime required minimum distributions. Beneficiaries are subject to inherited-account distribution rules, which can include a 10-year deadline or life-expectancy treatment for certain eligible designated beneficiaries.
The lack of owner RMDs can make Roth accounts useful in estate and retirement-income planning, but conversion tax, future rates, cash needs, Medicare income-related premiums, credits, and California treatment should be modeled rather than assumed.
Form 5498 reports contributions and certain account activity. Form 1099-R reports distributions and conversions. Form 8606 is used for conversions and certain Roth distributions, but regular Roth contributions are not reported on Form 8606.
Keep contribution confirmations, conversion Forms 8606, rollover records, prior Forms 5498 and 1099-R, and evidence of the first Roth contribution year. Custodian statements may not preserve the full tax history after transfers.
California generally follows federal Roth IRA treatment, but differences can arise from California IRA basis and nonconformity. FTB Publication 1005 includes a Roth conversion worksheet for cases in which the federal and California taxable conversion amounts differ.
California does not conform to the federal provision allowing certain Section 529 plan rollovers to Roth IRAs. The FTB states that such a rollover is included in California taxable income and subject to an additional 2½% California tax. Schedule CA (540) may therefore require an adjustment even when the federal rollover qualifies.
Heath Income Tax can review Roth eligibility, excess contributions, conversions, distributions, Form 8606, and federal-versus-California adjustments.
Can I contribute to a Roth IRA if I have a 401(k)?
Yes, if compensation and Roth income rules are met. Workplace-plan participation does not itself prohibit a Roth IRA contribution.
Can I deduct a Roth IRA contribution?
No. Regular Roth contributions are made with after-tax dollars.
Can I withdraw my contributions?
Federal ordering rules generally treat regular contributions as distributed first, but transaction history and state treatment should still be documented.
Are Roth conversions income-limited?
Conversions are not subject to the regular Roth contribution income limit, but taxable income and pro rata basis rules apply.
The definitions and examples on this page are for informational purposes only and do not constitute tax advice. Tax laws change frequently and individual circumstances vary. Consult a qualified tax professional before making decisions based on this content.
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