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4 Tax Challenges You May Encounter If You’re Retiring Soon

Are you getting ready to retire? If so, you’ll soon experience changes in your lifestyle and income sources that may have numerous tax implications.

Here’s a brief rundown of four tax and financial issues you may contend with when you retire:

Taking required minimum distributions. These are the minimum amounts you must withdraw from your retirement accounts. You generally must start taking withdrawals from your IRA, SEP, SIMPLE and other retirement plan accounts when you reach age 73 if you were age 72 after December 31, 2022. If you reach age 72 in 2023, the required beginning date for your first RMD is April 1, 2025, for 2024. Roth IRAs don’t require withdrawals until after the death of the owner.

You can withdraw more than the minimum required amount. Your withdrawals will be included in your taxable income except for any part that was taxed before or that can be received tax-free (such as qualified distributions from Roth accounts).

Selling your principal residence. Many retirees want to downsize to smaller homes. If you’re one of them and you have a gain from the sale of your principal residence, you may be able to exclude up to […]

By Linkenheimer LLP|2023-05-16T15:27:18+00:00May 16th, 2023|ira, retirement, social security|0 Comments

There Still May Be Time To Make An IRA Contribution For Last Year

If you’re getting ready to file your 2022 tax return, and your tax bill is higher than you’d like, there may still be an opportunity to lower it. If you’re eligible, you can make a deductible contribution to a traditional IRA right up until this year’s April 18 filing deadline and benefit from the tax savings on your 2022 return.

Rules for eligibility

You can make a deductible contribution to a traditional IRA if:

You (and your spouse) aren’t an active participant in an employer-sponsored retirement plan, or
You (or your spouse) are an active participant in an employer plan, but your modified adjusted gross income (MAGI) doesn’t exceed certain levels that vary from year-to-year by filing status.

For 2022, if you’re a married joint tax return filer and you are covered by an employer plan, your deductible IRA contribution phases out over $109,000 to $129,000 of MAGI. If you’re single or a head of household, the phaseout range is $68,000 to $78,000 for 2022. For married filing separately, the phaseout range is $0 to $10,000. For 2022, if you’re not an active participant in an employer-sponsored retirement plan, but your spouse is, your deductible […]

By Linkenheimer LLP|2023-02-21T15:53:28+00:00February 21st, 2023|contributions, ira|0 Comments

Answers To Your Questions About Taking Withdrawals From IRAs

As you may know, you can’t keep funds in your traditional IRA indefinitely. You have to start taking withdrawals from a traditional IRA (including a SIMPLE IRA or SEP IRA) when you reach age 72.

The rules for taking required minimum distributions (RMDs) are complicated, so here are some answers to frequently asked questions.

What if I want to take out money before retirement?

If you want to take money out of a traditional IRA before age 59½, distributions are taxable and you may be subject to a 10% penalty tax. However, there are several ways that the 10% penalty tax (but not the regular income tax) can be avoided, including to pay: qualified higher education expenses, up to $10,000 of expenses if you’re a first-time homebuyer and health insurance premiums while unemployed.

When do I take my first RMD?

For an IRA, you must take your first RMD […]

By Linkenheimer LLP|2022-12-22T14:54:55+00:00December 22nd, 2022|ira, retirement|0 Comments

Inflation Reduction Act Provisions Of Interest To Small Businesses

The Inflation Reduction Act (IRA), signed into law by President Biden on August 16, contains many provisions related to climate, energy and taxes. There has been a lot of media coverage about the law’s impact on large corporations. For example, the IRA contains a new 15% alternative minimum tax on large, profitable corporations. And the law adds a 1% excise tax on stock buybacks of more than $1 million by publicly traded U.S. corporations.

But there are also provisions that provide tax relief for small businesses. Here are two:

A payroll tax credit for research

Under current law, qualified small businesses can elect to claim a portion of their research credit as a payroll tax credit against their employer Social Security tax liability, rather than against their income tax liability. This became effective for tax years that begin after December 31, 2015.

Qualified small businesses that elect to claim the research credit as a payroll tax credit […]

By Linkenheimer LLP|2022-08-29T21:45:48+00:00August 29th, 2022|ira, New Tax Laws|0 Comments

Is it a Good Time for a Roth Conversion?

The downturn in the stock market may have caused the value of your retirement account to decrease. But if you have a traditional IRA, this decline may provide a valuable opportunity: It may allow you to convert your traditional IRA to a Roth IRA at a lower tax cost.

Traditional vs. Roth

Here’s what makes a traditional IRA different from a Roth IRA:

Traditional IRA. Contributions to a traditional IRA may be deductible, depending on your modified adjusted gross income (MAGI) and whether you (or your spouse) participate in a qualified retirement plan, such as a 401(k). Funds in the account can grow tax deferred.

On the downside, you generally must pay income tax on withdrawals. In addition, you’ll face a penalty if you withdraw funds before age 59½ — unless you qualify for a handful of exceptions — and you’ll face an even larger penalty if you don’t take your […]

By Linkenheimer LLP|2022-06-10T22:02:57+00:00June 10th, 2022|investment, ira, tax planning|0 Comments