Tax Now, Tax Later, Tax Never

With Income that you have earned this year, some of it could be deferred and the tax paid later by investing in your 401K or putting it into a traditional IRA.  However; this deduction phases out if modified adjusted gross income(MAGI) is between $89,000 and 109,000.  Roth IRA are purchased with after tax dollars but the earnings are never taxed which is of tremendous advantage especially for legacy gifting.  Roth IRA do not require a minimum distribution(RMD) at age 70½.  Roth phase out for Taxpayers whose MAGI is between $159,000 and $169,000.

My combined tax and financial advice is for anyone who expects their Adjusted Gross Income(AGI) to be less $67,900 married filing jointly(MFJ) should convert the difference from a traditional IRA or 401K funds to Roth.  Pay only 15% on the converted income now and make it and all future earnings on the amount tax free.  If you’re filing single, that income number is $33,950.

I would even advise clients to convert if their joint AGI is less than $137,050.  That is maximum for the 25% tax Bracket.  It is $68,526 AGO for single taxpayers.

If anyone wants to take an opportunity to do some tax planning for this year, I have time available to discuss these or other tax planning ideas prior to the end of the year.  You may call me on my cell (937) 408-4433.

Here a website where you can calculate your modified adjusted gross income (MAGI)

http://money.cnn.com/tmp/networth2.html