Tag Archives: tax

Money Matters

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I participated in the Orlando Sentinel Money Matters Hotline. I will be sharing some of the excellent questions I was asked by your neighbors. Here is one:

Q: I work full time and have a 401k as well as an IRA. What will I have to pay tax on when I retire?

A: At age 70.5 you will be required to take a Required Minimum Distribution. Your total qualified retirement account balances as of 12/31/ the year prior to 70.5 multiplied by 3.65% will be the first RMD. This is all taxable as ordinary income.

 

Disclosures:http://www.hechteffect.net/?page_id=31

When is $1 million not really $1 million?

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Congratulations! You have finally reached full retirement and you have accumulated $1 million in your retirement accounts. But do you really have $1 million?

Withdrawals from your retirement accounts, 401k, 403b, regular IRA’s, are fully taxable at ordinary income tax rates. After taxes, your $1 million may be closer to $750,000 or less.

It is important to decide which accounts to tap into first for your retirement income. Most retirees feel it is better to tap into taxable accounts first. This is, however, not always the best choice. You need to know what your tax bracket is in order to make the best choice for you. The wise decision might be to withdraw from both taxable and tax-deferred at the same time.

Please feel free to call me or send an email to nancy@financialgroup to determine what might be your best choice

Tax time is always a stressful time of year; it is made worse if you are going through a divocre.

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I have a couple of friends in this situation and even the amicable ones are arguing over the tax issues. Here are a few key issues:

Do you file joint or single for the year of the divorce? Is filing as head-of-household better?

Who gets the exemption for the kids? Do we split the exemption?

How will you split your assets? Often, 50/50 based on dollar value is the basic but you need to look at cost basis; is an asset tax-free or tax-deferred.

Is there going to be alimony or child support? Make sure you know which of these will impact your taxable income for the coming years.

There is a lot of pain in divorce. By consulting a qualified tax professional your tax return can be less painful.

Your taxing questions

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Q: I take enough required minimum distribution from my IRA to cover all of the RMD. Do I need to take a seperate RMD from my 401k?

A: As long as you withdrawl the required amount, no you do not.

Q: Can I still deduct sales tax in 2011?

A: If you itemize, the deduction for sales tax still applies for 2011.

Year-End Tax Savings Tips

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As 2011 comes to a close, it’s time to figure out what you can do to lower your tax bill. Here are some quick tips:

Sell loser stocks in your taxable accounts. You can deduct the capital loss against capital gains. No gains? You can deduct up to $3000 in losses per year.

Convert a traditional IRA to a Roth IRA. If your traditional IRA is worth less than it once was, the tax hit from converting it to a Roth will be substantially less. After the conversion, all income and gains accumulated in the Roth will be tax free.

Give to charities. You can donate securities directly to the charity or you can donate cash. Either way – it is a benevolent way to avoid taxes.