Remember that up until April 15 you can make a deductible ‘traditional IRA’ contribution of $5000 ($6000 if over 50 years old) for yourself if single and $5000 ($6000) each if you are married. You need at least the amount of the contribution in earned income (salaries, self employed income) to qualify. If you are in the 25% tax bracket (fed & state) it will save you $1250 for each $5000 contributed, so it only costs you $3750 in dollars to contribute the $5000. If you have a retirement plan at your work there are income limits to make the contribution. If you make less than $56000 single or $89000 married your contribution will start to phase out. Let me know if you want to discuss this at bstonercpa@sbcglobal.net Or you could make a Roth IRA contribution. There is no upfront tax deduction but if you don’t withdraw the money for the longer of 5 years or you turn 59 1/2, all withdrawals are tax free. A traditional IRA withdrawal is 100% taxable since you got a tax deduction up front for your contribution. This is tax deferral. A Roth is totally tax free. If you expect (like me) that [...]
Brian’s Tax Musings
Just posted a tip on my website about section 105 medical reimbursement plans. A good way to take a medical deduction you may or may not get on your itemized deductions. Check it out on www.briantstonercpa.com under tax and financial tips.Nothing new that I can see on extending the Bush Tax Cuts. Three weeks to go before they expire. Will they be extended in exchange for an extension of unemployment compensation? Tune in to our next thrilling episode (or 2 or 3 or more) to find out!The 2% reduction in the social security payroll tax (as opposed to the $400 or $800 making work pay credit) makes this a middle class tax savings that Obama should be able to sell, but what does it do long term for social security stability. Still think in the future there will be some messing around with the age when you can get full benefits. The payroll tax savings will only be for one year. Is there more to come. We shall see.
Brian’s Tax Musings
As I thought, the extension of Bush’s tax cuts will go hand in hand with extending unemployment for 13 months. It is slowly winding its way through Congress, and many Democratic congressmen may not back the President.Tax rates, including 15% on long-term capital gains and dividends, stay the same, except for payroll and estate taxes.Social secuity taxes for employees (not employers) go down 2% (I assume also for half of SE tax), while estate exclusion will be 5,000,000 and top rate 35%. The child-care, earned income and education credits will get extended and the AMT gets indexed for inflation. This is good for 2011 and 2012, just in time for the Presidential Elections.I am curious to see how long it takes for this bill to be passed, reconciled and signed. We will see.