M1: Adjustments

Question 1

Individual Retirement Accounts

Answer 1

Deductible IRA
Nondeductible IRA
Roth IRA
Coverdell education savings accounts

Question 2

IRA Deductibles

Answer 2

• earnings accumulate tax free
• withdrawals from deductible IRA are taxable as ordinary income

Deductibility requirements: No IRA deduction if Rich (excessive AGI Single:62k-72k. Joing: 99k-119l) AND In a retirement plan (more than 186k but less than 196k)

Amount of deduction 2017 : maximum deduction is limited to the less of $5,500 or individual’s compensation

The maximum contribution for a married couple filing jointly: $11k (5,500 each spouse)

Question 3

Roth IRA

Answer 3

• contributions made to Roth IRA are not deductible
• earnings accumulate tax free while in a Roth IRA account
• distribution of both principal & interest are also tax free provided they are qualified distributions
• Single: 5,500
• Married: 11,000

Question 4

Nondeductible IRA

Answer 4

• contribution limitations limited up to the lesser of 5,500 for 2017, individual compensation
• earning on contributions will accumulate tax free
• distributions will be taxed as follows: t
  
  • taxable: previously accumulated untaxed earnings
  • nontaxable: the principal contributions (not deducted when contributed)

Question 5

Coverdell Educations

Answer 5

• contributions are nondeductible: maximum per beneficiary is $2,000 annually (lots of grandchildren)
• tax free distributions (withdrawals: to the extent that they are sue for qualified education expenses of the designated beneficiary)

Question 6

Keogh Plans: Self employed retirement plan

Answer 6

Not deducted on Schedule C. Earned income is defined as net self employment earnings by the amount of the allowable Keogh deduction and half the self-employment tax