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Beyond 401(k) and IRA

You’re contributing as much as you’re allowed to a 401(k) or other employer-sponsored retirement plan. If your income allows it, you’re also contributing the maximum annual amount to your Roth or traditional IRA. But you still want to set aside more money beyond 401(k) and IRA, to make sure your retirement is everything you hoped for. What options do you have? Here are some things to consider… Before moving beyond – are you really maxing our your 401(k) and IRA? IRAs and employer-sponsored retirement plans like 401(k)s have some real advantages when it comes to saving for your retirement. So, before you go any further, make sure you’re really contributing all you can. In 2020, most individuals can contribute up to $19,500 to a 401(k) plan, and up to $6,000 to a traditional or Roth IRA (subject to income limitations). If you’re age 50 or better, though, you can make […]

The “Fiscal Cliff”

What is the “fiscal cliff”? It’s the term being used by many to describe the unique combination of tax increases and spending cuts scheduled to go into effect on January 1, 2013. The ominous term reflects the belief by some that, taken together, higher taxes and decreased spending at the levels prescribed have the potential to derail the economy. Whether we do indeed step off the cliff at the end of the year, and what exactly that will mean for the economy, depends on several factors. Will expiring tax breaks be extended? With the “Bush tax cuts” (extended for an additional two years by legislation passed in 2010) set to sunset at the end of 2012, federal income tax rates will jump up in 2013. We’ll go from six federal tax brackets (10%, 15%, 25%, 28%, 33%, and 35%) to five (15%, 28%, 31%, 36%, and 39.6%). The maximum rate […]

Using the Prohibited Transaction Rules to Your Advantage

Image by chris_wilson via Flickr I’ve written in the past about the types of transactions that are prohibited in your IRA, and how these transactions are generally quite onerous if you happen to use one of them.  In fact what happens is that your entire IRA becomes disqualified as of the first of the year in which the transaction occurred. So – if you’re inquisitive you might wonder: How could I use this to my advantage? It is possible to work this rule in your favor – but I don’t necessarily recommend it.  I present this option here as an exercise of what could be done according to the rules.  I learned this one from Natalie Choate, by the way, who you may recall I regard as a rock star in the world of IRA law. Working in your favor So, given that the rule against prohibited transactions requires that […]

Tax Bill Higher Than You Expected?

Now that you’ve (hopefully) filed your return for 2010, you may have noticed that the bill was higher than you expected.  This may be due to some subtle changes to the tax law that affected your return for this year.  Listed below are some of the changes that you may have been impacted by: Social Security taxation: Especially if you had unusual income taxed in 2010, such as a Roth Conversion, you could be subject to as much as 85% taxation of your Social Security benefit. Alternative Minimum Tax: If you’ve been impacted by this, not only are your ordinary income tax items taxed at a higher rate, but your capital gains and dividends could be taxed at a rate higher than 15% as well.  This happens for folks with incomes between $150,000 and $439,800 (or $112,500 and $302,300 for singles) as the AMT exemption phaseout occurs. Image via Wikipedia […]

Capital Gains and Losses and Your Taxes

If you own taxable investment accounts, real estate, collectibles, or literally any item that can appreciate or depreciate in value, you’ve likely had to deal with capital gains or losses on your tax return.  (Actually, only if you’ve sold the item.)  But how much do you really know about capital gains and losses?  The IRS has published Tax Tip 2010-35 listing 10 Facts About Capital Gains and Losses – detailing what the IRS deems important about gains and losses and how they could effect your tax situation.  Following below the IRS’ list is some additional detail on treatment of capital gains and losses. 10 Facts About Capital Gains and Losses Almost everything you own and use for personal purposes, pleasure or investment is a capital asset. When you sell a capital asset, the difference between the amount you sell it for and your basis – which is usually what you […]