Did you know you’re not the only one who’s allowed to contribute to your Roth IRA? Someone else can contribute into your account for you, just as long as you’re eligible to contribute yourself.

How it works

In order for other people to be able to make contributions into your Roth IRA, you, the account holder, must be eligible to make contributions for the tax year.

Contributions for a Roth IRA have two eligibility criteria.

  1. First, you need to have earned taxable income. You cannot make contributions if you don’t make any income.
  2. Second, you can’t make too much income. The Roth IRA has an income limit where you’re restricted from making contributions for the year if you exceed the annual limit.

As long as you pass these two requirements, you’re eligible to make contributions to your own Roth IRA, or someone else could make contributions for you.

Also read: What is a Roth IRA?

Contribution limits

A Roth IRA has a contribution limit of $6,500 ($7,500 if age 50+) for 2023. You could only contribute as much as your earned income for the year, up to the annual limit.

For example, if you only make $2,000 in income for 2023, you could only contribute up to $2,000 into your Roth IRA. If you make at least $6,500 in income for the year (or $7,500 if you’re at least 50 years of age), then you could contribute the maximum amount. If someone else were to make contributions into your own account, they could only contribute as much as you would be able to contribute. For example, if you only made $2,000 for the year, then someone else could only contribute up to $2,000 into your account.

Income limits

Income restrictions work the same way. If you exceed the Roth IRA income limits, then someone else wouldn’t be able to contribute to your account, even if they don’t exceed the income limits. The income limit rule applies to the account holder and not the contributor.

What are the Roth IRA income limits?

For 2023, your income must be under $138,000 in order to contribute the maximum amount of $6,500 to a Roth IRA, or $7,500 if you’re over 50 years old. If your income is higher than $138,000 but less than $153,000, you can still make contributions, but your limit gets reduced. If you make over $153,000, you cannot contribute at all.

  • If your income is $138,000 or less, you can contribute up to the maximum Roth IRA contribution limit of $6,500 ($7,500 if age 50+).
  • If your income is over $138,000 but less than $153,000, your contribution limit gets reduced.
  • If your income is over $153,000, you cannot contribute at all.

Methods of contribution

There are two different ways that someone can contribute to your Roth IRA.

  1. They can give you the money so that you can make the contribution yourself.
  2. They can deposit the money directly into your account.

Give clear instructions to the contributor

Each plan provider has different deposit methods so make sure to check with them on the best way to contribute.

Usually, the contributor will write you a check or make an electronic transfer directly to the IRA. It’s important to provide clear instructions to the IRA custodian, including the account holder’s name, account number, and that the funds are intended as a Roth IRA contribution. The account holder may need to provide the contributor with their IRA custodian’s contact information to facilitate the process.

The contributor may need to pay gift taxes

The annual gift tax exclusion amount for 2023 is $17,000 per individual, or $34,000 per married couple. That means that you can gift money to others tax-free only up to that amount. If the gift amount is higher than the exclusion, the giver may need to file a gift tax return and potentially pay gift tax.

Are withdrawal rules the same for contributions made by someone else?

Yes, the withdrawal rules of your Roth IRA funds are the same whether you make the contribution or someone else does. With a Roth IRA, you can withdraw your contributions at any age without any penalties or taxes. If someone were to make a contribution to your Roth IRA, technically, you could withdraw the money immediately tax and penalty free.

However, earnings in your Roth IRA cannot be withdrawn until your Roth IRA is at least 5 years old, and you reach the age of 59½. Any earlier withdrawals of earnings from your Roth IRA will get hit with a 10% early distribution penalty plus income taxes on the withdrawal amount.

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Anyone who makes money from a business, freelancing, or a side hustle is eligible, as long as you have no employees.