ROTH IRA contribution exceeds $0 earned income, but.....

Forum|Forum|1 year ago
February 16, 2025
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ROTH IRA contribution exceeds $0 earned income, but my daughter's income includes a 1099-G Taxable Grant for $44K for her post-doc research. She contributed $3K for ROTH IRAs during 2024, TT won't allow me to input this or recognize $44K as earned income? How do I input this as this is shown on 1099-G as "taxable grant".

MinhT1

A taxable grant is not earned income and does not allow you to contribute to a Roth IRA account.

The IRS defines earned income in this IRS document.

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wkee57Author

Thanks MinhT1 for the reply, there was conflicting information on the this Q&A board that indicated that it may be counted towards earned income. Ugh!

fanfare

Employee

return of excess contribution:

before tax filing date including extension: positive earnings allocable to the excess are included in income on 1040 Line 4b for the year of the contribution. negative earnings are ignored; in any case, for purposes of basis, consider the original contribution amount as returned.
["Include the earnings in income for the year in which you made the contributions, not the year in
which you withdraw them."]

You must have a) filed by tax day, or b) requested an extension of time to file by tax day to take advantage of the Oct 15 deadline.

Consult your custodian to obtain the correct removal form for "excess plus earnings".

@wkee57