Can a Roth Really Help You Lower Your Taxes?
Patience is a virtue, but will it save you money on taxes? That depends on the situation, but if you’re talking about a Roth IRA, then the answer is typically yes. Traditional IRAs will usually give you an immediate tax savings, while a Roth IRA won’t. However, for those who have patience, a Roth can be a great tax saver in the years to come.
Because the IRS doesn’t give you an immediate tax deduction you are essentially being forced to use your own after-tax income to build your retirement account. The benefit of a Roth IRA over a traditional IRA is that when it comes time to withdraw the money you can take it all tax-free. With a traditional IRA you will be taxed on that income when you withdraw it.
That means your Roth IRA could give you a big boost. Any gains your account has made can be withdrawn tax-free so long as you have had the account for at least five years and as long as you don’t withdraw the money before the age of 59-1/2. There is one other tax-related benefit to Roth IRAs in some cases, and it is an upfront tax break. Some low- or middle-income earners can use what’s called a Saver’s Credit, which allows them to receive a 10-50 percent tax savings on the first $2,000 they put in their retirement account. This goes for 401k plans, as well as both traditional and Roth IRAs.
So there you have it. When it comes to taxes and Roth IRAs, patience is indeed a virtue. Click here to contact us and learn about other tax savings and retirement tips, or give us a call at 1-877-CPA-2006.
Why not a CPA as President?
Why not a CPA as President? By William Brighenti With the economy the most central issue, why not elect a CPA as President? A recent poll showed that 47% of our fellow citizens thought that the economy was the central issue of our country. So we elect lawyers to manage and direct our economy? Why…
Business Income insurance
Business Income insurance Business Income Insurance – Often Misunderstood; Things to Think About By R. Scott Wolf Business Income Insurance is probably one of the least understood components of an insurance program, yet it is probably one of the most important. It is akin to what disability insurance does for us personally should we become…
Business Sales Tax
Business Sales Tax Sale of a Business – Sales Tax Impact Buying and selling a business can be structured to be tax-free from the standpoint of federal income taxes through the merger and other reorganization provisions of the Internal Revenue Code. However, a tax-free transaction from a federal standpoint may not be tax-free for State…
Tax Telecommuting
Tax Telecommuting If you’re thinking about setting up employees as telecommuters, you’re not alone. Businesses ranging from large multi-nationals to small shops know that telecommuting not only can improve worker morale and performance, it can also save you and your employees money. What’s not to like about zero commuting costs and no office rent? You…