Assignment 2 Flashcards
Allowable Deductible IRA Contribution
- $5,000 in 2008 (indexed in future years )
- Increases by $500 increments
- $5,500 in 2009 and 2010
- Catch‐up Contribution $1,000 (in 2008)
IRA Contribution Deductibility Limit
- Single ‐‐taxpayers $52,000 ‐$62,000 in 2007
* Married taxpayers – $83,000 ‐ $103,000 in 2007
Excess Contribution Excise Tax
- 6% excise tax in addition to current income taxation.
* Applied each year until the excess contribution is withdrawn from the IRA
Roth IRA
• Same contribution limits as regular IRA
• Contributions are taxed in year of contribution
• Distribution (earnings and contributions) are
not taxed if “qualified”
Conversion to Roth IRA
• Individual IRA owner can opt to transfer regular IRA to Roth IRA – converted amounts are taxed in year of conversion, no early
distribution penalty
Deemed IRA
• Created by EGTRRA
• Employer‐sponsored plan can have IRA
accounts that accept voluntary contributions
Tax Credit
• Encouragement for lower and middle
income employees to contribute to
retirement plan
• Tax credit claimed on individual’s tax return