|
2008 Cost of Living Adjustments
Traditional and Roth Contribution Limits (annual per person)
For Tax Year Under Age 50 Age 50 or Older
2007 $4000 $5000
2008 $5000 $6000
Regular contribution deadline is the tax filing deadline with no extensions (usually April 15th or next business day)
Deductibility of Traditional IRA Contributions if participating in a Qualified Plan: Tax Year Full Ded Partial Ded No Ded Single:
2007 <$52,000 $52,000-$62,000 >$62,000
2008 <$53,000 $53,000-$63,000 >$63,000 Married:
2007 <$83,000 $83,000-$103,000 >$103,000
2008 <$85,000 $85,000-$105,000 >$105,000 Married - One Spouse has QP, Other Spouse no QP Non-Covered Spouse Phaseout
2007 <$156,000 $156,000-$166,000 >$166,000
2008 <$159,000 $159,000-$169,000 >$169,000
|
Roth Contribution Eligibility - Income Phaseout
Tax Year Full Cont Partial Cont No Cont
Single:
2007 <$99,000 $99,000-$114,000 >$114,000
2008 <$101,000 $101,000-$116,000 >$116,000
Married:
2007 <$156,000 $156,000-$166,000 >$166,000
2008 <$159,000 $159,000-$169,000 >$169,000
Simplified Employee Pension Plan Contribution Limits
For Tax Year Percentage Compensation Maximum Contribution
2007 0 - 25% $225,000 $45,000 (max)
2008 0 - 25% $230,000 $46,000 )max)
Contribution deadline is the employer's tax filing deadline PLUS extensions
|
|
Pension Protection Act of 2006 (effective August 17, 2006) - Beginning January 1, 2007, nonspouse beneficiaries of a Qualified Employer Plan will be able to do a "direct" rollover into an Inherited IRA at a financial institution if the plan allows. They will then be able to take single life expectancy payouts beginning the year after the owner's death.
- Beginning January 1, 2008, both pre-tax and after-tax contributions in a Qualified Employer Plan will be able to be rolled directly into a Roth IRA subject to the $100,000 income limit for conversions. Pre-tax contributions rolled into the Roth will be includible in income the year they are rolled over.
- Qualified reservists called to active duty between 9/11/01 and 12/31/07 may take penalty-free withdrawals from their IRAs and have two years after discharge of active duty to roll the funds back in.
- In 2006 and 2007, 70 1/2 year old accountholders may make direct tax-free distributions to a qualified charity up to $100,000 each year to satisfy their RMD.
REPORTING NOTE: The financial institution will report these charitable distributions as a "Normal" distribution to the accountholder on the 1099-R (IRS code 7). The accountholder will take the exception on line 15a and 15b of his/her personal 1040 tax form. - From 1/1/07 through 12/31/09 participants of certain employer plans who declare bankruptcy may make IRA catch-up contributions up to $3000/per year.
- Some of the provisions of EGTRRA that were set to expire - including the Savers Tax Credit provision - are made permanent.
- Cost of living increases will apply to IRA products.
- Beginning for 2006 refunds, taxpayers can deposit their tax refunds directly to an IRA as a regular contribution.
HEROS ACT - defines combat pay, which is not considered "taxable" income, but will be considered "earned" income for purposes of IRA contribution eligibility.
|
NEW ROTH CONVERSION RULES EFFECTIVE 2010
The Tax Increase Prevention and Reconciliation Act of 2005 (TIPRA) was signed into law in May, 2006.
Effective 2010, anyone - regardless of income - will be able to convert their Traditional IRAs to Roth IRAs. Currently there is a maximum $100,000 annual income limit to allow conversions.
If the funds are converted in the 2010 calendar year, the taxable income reporting can be postponed to 50% in 2011 and the other 50% in 2012. No taxable income is reported in 2010, the actual year of the conversion. Any conversion after 2010, would be reported as taxable in the year converted.
Loophole - Contributors who have MAGI over the annual income limits who are not allowed to make regular contributions to a Roth, will be able to make contributions to a Traditional and then convert them to a Roth to build up tax-free income savings.
|
|
|
