ripvanwinkle
Well-Known Member
Joined: Jan 9, 2011 22:36:42 GMT -5
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Post by ripvanwinkle on Feb 22, 2014 13:05:54 GMT -5
All this time I thought funding non traditional IRA was a tax deduction. $6500. I'm doing my taxes and I clicked on the info on the HR Block program says:
"Contributions to traditional IRAs may or may not be deductible, depending on your income and whether or not you participated in a retirement plan. Contributions to Roth IRAs aren't deductible".
Whats up with that?
Note - I just corrected this to be a non traditional IRA, I misspoke.
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busymom
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Post by busymom on Feb 22, 2014 13:26:46 GMT -5
Because on a Roth, you pay the taxes on it when you're withdrawing your money after retirement. I'll let our resident tax experts give you more details.  |
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thyme4change
Community Leader
Joined: Dec 26, 2010 13:54:08 GMT -5
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Post by thyme4change on Feb 22, 2014 13:30:45 GMT -5
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ripvanwinkle
Well-Known Member
Joined: Jan 9, 2011 22:36:42 GMT -5
Posts: 1,363
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Post by ripvanwinkle on Feb 22, 2014 13:40:22 GMT -5
Hmmm, looks like I've been funding the wrong thing
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thyme4change
Community Leader
Joined: Dec 26, 2010 13:54:08 GMT -5
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Post by thyme4change on Feb 22, 2014 13:55:13 GMT -5
The good news is that it is good to have both in retirement. You take money out of your tax-delayed account (401k and traditional IRA) up until the point where you have taxable income, and then you use the money out of your Roth, which isn't taxable, to cover the rest of your lifestyle. You pay less taxes, giving you more income. Very helpful in tax planning.
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mwcpa
Senior Member
Joined: Jan 7, 2011 6:35:43 GMT -5
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Post by mwcpa on Feb 22, 2014 18:53:41 GMT -5
If you follow the rules with a Roth IRA contribution the withdrawal is 100% tax free, as the law is written today.
If you fund a deductible traditional IRA the entire withdrawal is subject to income tax.
If you fund a non deductible IRA some of the withdrawal is subject to tax and some is not. (see computation on form 8606).
Congress did not make this simple....
Personally, Congress should simplify this area....
My opinion....
Create 2 kinds of funds... a "deductible" account.... a "non deductible" account....
Get rid of 401(k)s (and other similar employer deferral plans)....and increase IRA deductible/non deductible amounts to be the same as the present day 401(k)....
That would eliminate hundreds of pages of law, rules and regulations and make things simple....but Congress won't have that....
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thyme4change
Community Leader
Joined: Dec 26, 2010 13:54:08 GMT -5
Posts: 40,468
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Post by thyme4change on Feb 22, 2014 19:09:24 GMT -5
Get rid of 401(k)s (and other similar employer deferral plans)....and increase IRA deductible/non deductible amounts to be the same as the present day 401(k)....
I like all of your ideas, especially this one. |
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mwcpa
Senior Member
Joined: Jan 7, 2011 6:35:43 GMT -5
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Post by mwcpa on Feb 23, 2014 12:43:41 GMT -5
"I like all of your ideas" the problem is Congress does not listen to people like me.... I do not donate enough to them or give their kids jobs... |
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