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 Any gains your account has made can be withdrawn tax-free so long as you have had the account for at least five years and as long as you don’t withdraw the money before the age of 59-1/2.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.
What is Sole Proprietorship?
What is Sole Proprietorship? A sole-proprietorship is a business that is owned by one person or by a husband and wife. Unless the business is formed as a corporation or a limited liability company, it will be a sole-proprietorship by default. One of the biggest advantages of operating a business as a sole-proprietorship is that…
Conducting Your Business as a Corporation
Conducting Your Business as a Corporation The limited personal liability of a corporation isn’t ironclad. In the event the business ends up owing more money to a creditor than it has the ability to pay, the creditor will then look to the business owner. Under a legal theory known as “piercing the corporate veil,” if…
Budgeting For Your Business
Budgeting For Your Business “Your business opportunities improve with the use of a budget, a powerful tool which assists you in achieving your financial goals.” Introduction: A well-designed budget helps you: Predict income and expenses Control cash flow Communicate financial goals As an entrepreneur, you may not have the time or financial expertise to establish…
Deducting Start-Up Expenses: An Open Or Shut Case
Deducting Start-Up Expenses Starting a business typically takes more than a little know-how. More often than not, it requires cold, hard cash. However, there is some good news — you may qualify for a little help from Uncle Sam in the form of a tax deduction for some of your start- up costs. The costs,…