Taxes: Retirement Plans

Question 1

Taxes:
Retirement Plans
Modified AGI

Answer 1

Modified AGI:
AGI
+ IRA Deduction
+ Domestic Production Activities Deduction
+ Student Loan Interest
+ Foreign Earned Income Exclusion & Housing Exclusion
+ Exclusion for Employer Provided Adoption Assistance

Question 2

Taxes:
Retirement Plans
Traditional IRA’s

Answer 2

Traditional IRA’s

• contributions limit is $5,500 per individual (extra $1,000 if over 50)
• there is a phaseout
• IRA Deductions: contributions are a for AGI deduction
• married spouse can deduct if inactive even though spouse is active
• taxpayers who cannot deduct can still defer
• must be made by due date of the return

Question 3

Taxes:
Retirement Plans
Roth IRA’s

Answer 3

Roth IRA’s

• contributions limit is $5,500 per individual (extra $1,000 if over 50)
• there is a phaseout
• conversion of traditional to roth is taxable event
  
  • gain at time of conversion to extent conversion amount exceeds tax basis
• same as rules for 401(k)s

Question 4

Taxes:
Retirement Plans
Coverdell Educational Savings Account

Answer 4

Coverdell Educational Savings Account

• contributions are not deductible, but may not be subject to tax
• established exclusively to pay higher education costs for a beneficiary under age of 18
• limited to $2,000 per beneficiary per year

Question 5

Taxes:
Retirement Plans
Retirement Distributions

Answer 5

Retirement Distributions

• withdrawal from IRA is taxed as income in year of withdrawal
• early withdrawal penalties of 10% if before 59.5
  
  • exempt if: death, disability, medical, first time home buyer ($10k), higher education, military duty
• withdrawals begin when taxpayer reaches 70.5
• up to $100,000 tax free if given to charity
• if recieves distribution that would be subject to the penalty, has 60 days to deposit in new plan

Question 6

Taxes:
Retirement Plans
Withdrawal from Roth or Coverdell

Answer 6

Withdrawal from Roth 
- not taxed as income
- may be tax exempt
- not taxed if 5 years after contribution and age 59.5
Coverdell
- used for higher education expenses

Question 7

Taxes:
Retirement Plans
Retirement Distributions
Qualified Plans

Answer 7

Qualified Plans

• most taxpayers don’t have basis in these plans because they receive a deduction
• annuity rules used to determine taxable portion of payment

Question 8

Taxes:
Retirement Plans
Retirement Distributions
Special Retirement Plans

Answer 8

Special Retirement Plans

• self employed taxpayers may make contributions to special retirement plans
• Keogh Plans: based on self employment earnings

Question 9

Taxes:

Health Savings Accounts

Answer 9

Health Savings Accounts

• deduction for AGI in year made
• nonqualified distributions get 20% penalty