The IRS Deductions Blog

Archive for the ‘Tax Deduction Limits’ Category

Question: Question regarding the conversion process that removes the income limit for ROTH IRA’s in 2010.?

I am not eligible for a ROTH IRA, but I have read of the provision that allows the converting of a non-deductible IRA to a ROTH IRA in 2010. The question is this: once I convert the funds in 2010 to a ROTH IRA, can I contribute to the ROTH account going forward or will I still not be able to since I do not meet the eligibility requirements? If I can only save for 2 years and then convert, but not able to put in more money, I do not think it would be worth it to convert. Does anyone know?

Answer: i would not make any financial moves on what is currently scheduled to happen in 2010. there could be many changes in congress (and president change) before then. that means current law could change many times before 2010.

keep saving and investing in taxable and non-taxable accounts but wait to see what happens with the Roth etc in 2009 and early 2010 before making any big moves. good luck.

Items on Amazon Right Now for Non Deductible Ira Income Limits:

Question: INVESTING AND RETIREMENT QUESTION! 10 pts! ?

A retiree has a nest egg of $50,000 that earns 5.5 percent per year,
compounded quarterly. If the nest egg is to be depleted to zero in 30 years, how much should be withdrawn each month?

a. $537
b. $340
c. $281
d. $230

The deductibility of contributions to a traditional IRA can be limited by:

a. age or adjusted gross income (AGI).
b. whether or not a person has earned income.
c. whether or not a spouse is covered by a retirement plan
atwork.
d. All of the above factors can limit the deductibility of
contributions to a traditional IRA.

If a contribution to a traditional IRA is not deductible:

a. there is no point in making the contribution because it will
not save any tax.
b. the contribution must be used for higher education expenses
if it is withdrawn before age 591h.
c. the income from the contribution will be compounded tax
deferred until the money is withdrawn.
d. it should be converted immediately to a Roth IRA.

Answer: 1-c, actually I calculated $274.89 per month
2-d
3-c

Items on Amazon Right Now for Deductible Ira Income Limits:

Question: How to calculate tax if I convert a rental house into primary residence?

I bought a house in 2009 and plan to rent it out for 5 years and then live in it for 5 years, after that I’ll sell it. I heard that there is a new tax law that limits tax deduction as primary residence. How is it exactly calculated?

Answer: To give you a full answer.

You buy the property for $300,000. The house is worth $200,000 and is depreciated at $7272 per year. When sold at, say, $600,000, the $36363 of depreciation is recaptured at ordinary income rates (capped at 25%) which is fair because you got to deduct it while rented.

The gain from appreciation of $300,000 is eligible for the $250K exclusion, but with the law change, you must prorate the $250 over the period of use when it wasn’t your primary residence. So you get to exclude $125 (5 years/10 years times $250K). The remaining $275K is taxed at the long term capital gains rate in effect at the time you sell. This rate is currently 15%, but may increase.

Items on Amazon Right Now for Tax Deduction Limits 2009:

TurboTax Deluxe Federal + e-File + State 2010 – [Old Version] $3.50 The Intuit TurboTax Deluxe Tax Year 2010 Software walks you through over 350 deductions including mortgage interest, charitable contributions, education, medical expenses and more. Audit Risk Meter™ helps you reduce your chance of an audit. ItsDeductible® helps you accurately value charitable donated items. The Intuit TurboTax Deluxe Tax Year 2010 Software also guides you through changes…

TurboTax Deluxe Federal + eFile + State 2009 $11.30 TURBOTAX DELUXE WITH STATE…

KY3: Homebuilders worry about plan to limit Mortgage Deductions

Question: Can I convert a non deductible IRA that has after tax 401K funds into a Roth in 2010 when income limits expire?

Answer: Dear Bobby: Great question, not many people have thought that far ahead. Why not? Look at IRS Pub 17 page 124 and it makes clear the procedure to follow when you convert a nondeductible IRA to a Roth. Obviously the $100,000 figure is a hurdle now for you and in 2010 that hurdle will be removed. Make sure to retain all documentation related to the origin of the IRA and the tax paid status on the funds. Remember you can keep that Roth going even after you reach age 70 1/2.

This advice was prepared based on our understanding of the tax law in effect at the time it was written as it applies to the facts that you provide. Click on my profile to read more.
Errol Quinn Enrolled Agent Master Tax Advisor

Items on Amazon Right Now for Non Deductible Ira Limits:

Question: Please tell me if these are deductible?

Master card interest
Dental expenses
California state income tax
Charitable contribution
Mortgage interest on home purchase (personal)
Real estate taxes (personal)
Life insurance premiums
Investment interest
Automobile registration fees
Contribution to a reelection campaign

Answer: Master card interest — Only if business related.

Dental expenses — Yes, to the extent that they exceed 7.5% of your AGI

California state income tax — Yes

Charitable contribution — Yes, if to a registered charity

Mortgage interest on home purchase (personal) — Yes

Real estate taxes (personal) — Yes

Life insurance premiums — Only if business related, and even then there are limitations

Investment interest — Yes, but only to the extent of investment income

Automobile registration fees — No. However if an ad-valorem personal property tax is levied that is deductible. Some states lump this in with the registration fees. That portion is deductible. Business related fees are deductible however.

Contribution to a reelection campaign — No. Political contributions are never deductible

Items on Amazon Right Now for Tax Deductible Campaign Contributions:

What We Can Learn From the Tea Party

Exclusive: Van Jones on the American Dream, the American Nightmare and What We Can Learn From the Tea Party Amy Dean, Truthout: “In late June, Van Jones – a former ‘green jobs’ czar in the Obama administration and currently a senior fellow at the Center for American Progress – officially launched a new organization known as Rebuild the Dream.

When Bach Meets Rock Benefit Concert