3654 / Who may establish an IRA?
Note that the SECURE Act eliminated the age cap on IRA contributions. Further, the 2017 tax reform legislation eliminated the deduction for alimony payments and provides that alimony is no longer includable in the recipient’s income for tax years beginning after 2018. Because only “taxable” alimony constitutes “compensation,” alimony is no longer included after 2018.
If an individual is an “active participant” ( Q 3666), the deduction may be limited ( Q 3656). Any individual who can make a rollover contribution ( Q 3992) may establish an individual retirement plan (or more than one plan) to receive it ( Q 3996 to Q 4012).2
To establish and contribute directly to a Roth individual retirement plan, an individual (1) must have compensation (either earned income of an employee or self-employed person, or alimony (but see above)), and (2) must not have adjusted gross income (in 2025 (projected)) (a) of $XXX,000 or above in the case of a taxpayer filing a joint return, (b) or $XXX,000 or above in the case of a taxpayer filing a single or head-of-household return,3 or (c) $10,000 or above in the case of a married individual filing separately.4 In 2024 these amounts were $240,000 for joint returns and $161,000 for single or head-of-household, or $10,000 or above for married filing separately. An individual who satisfies these requirements may establish and contribute to a Roth IRA ( Q 3659).5
Planning Point: For taxpayers who exceed the income limits and are thus prohibited from contributing directly to a Roth IRA, a Roth IRA may still be established to receive rollover distributions from other IRAs or qualified plans (this strategy is commonly referred to as the backdoor Roth IRA).
As to what constitutes “compensation,” see Q 3665.