![]() Otherwise, the IRA owner would have a double benefit-a deduction when the funds were contributed to the traditional IRA and no tax when distributed from the Roth IRA in the future.Īlthough deductible contributions to a traditional IRA have AGI restrictions (for those in an employer’s plan), nondeductible contributions do not. But there is a price to pay for such conversions: to the extent the contributions to the traditional IRA had been deducted, the conversion is taxable. However, tax law also includes a provision that allows taxpayers to convert their traditional IRA funds to Roth IRAs without any AGI restrictions. For unmarried taxpayers, the phase-out is between $138,000 and $153,000. The allowable 2023 contribution for joint-filing taxpayers phases out at an adjusted gross income (AGI) between $218,000 and $228,000 (or an AGI between $0 and $9,999 for married taxpayers filing separately). The maximum contribution for 2023 is $6,500 ($7,500 if age 50 or older). High-income taxpayers are limited in the annual amount they can contribute to a Roth IRA. However, not everyone is allowed to make a Roth IRA contribution. Anyone who has compensation can contribute to a traditional IRA (although the deduction may be limited). In comparison, contributions to traditional IRAs may be deductible, earnings are tax-deferred, and distributions are generally taxable. Many individuals who are saving for retirement favor Roth IRAs over traditional IRAs because the former allows for both accumulation of account earnings and post-retirement distributions to be tax-free.
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