Getting married in 2021 means new Roth rules

So you’re getting married in 2021? Congratulations.

When you add your combined income (yours and your spouse’s), you may earn more than the limit to contribute to a Roth IRA. You may think since you’re below the income limit now, you can contribute to a Roth before the wedding. But guess what? You can’t.

The rules are the rules

If you're married as of Dec. 31, you're considered to be married for the full year for tax purposes – no matter what the wedding date. That means you'll file your taxes as married - either jointly or separately - for 2021.

You'll also be subject to the joint income limits for Roth contributions for the full year. If you're married filing jointly and your combined adjusted gross income is less than $198,000, then you both can contribute the full $6,000 to a Roth for the year (or $7,000 if you're age 50 or older).

Once your joint income reaches $198,000 to $208,000, then you both can make reduced contributions. You can't contribute to a Roth at all if your joint income is more than $208,000. See IRS Publication 590-A, Individual Retirement Arrangements, for a worksheet to calculate your modified adjusted gross income for the Roth limits.

And you can't get around the Roth limits by filing taxes separately. The income limit is just $10,000 for married people filing separately if you lived with your spouse at any time during the year.

If you earn too much to contribute to a Roth, you can both put money instead in nondeductible traditional IRAs for 2021 and then convert them to Roths. But you could be taxed on a portion of the rollover if you have any other money in traditional IRAs (the tax-free portion of the conversion is based on the ratio of your nondeductible contributions to the total balance in all of your traditional IRAs).

Be careful of excess contribution penalties

If you had already contributed to the Roth for the year and now your income disqualifies you, you would still have time to undo the contribution. Otherwise, you would have to pay a 6% penalty on excess contributions.

You could take the contributions (and any earnings on them) out of the Roth before the tax-filing deadline, or you could have your IRA administrator switch your 2021 Roth contributions (plus all earnings on that money) into a traditional IRA. If you made contributions to the Roth in earlier years, the administrator should calculate how much of the earnings in the account should be attributed to the 2021 contribution. You can keep the money from previous years' contributions in the account.

Be sure to consult your financial advisor to help you determine whether your contributions qualify or not.