individual (IRA)

IRA contribution limitation and phaseout

$6000+1000(over 50) phase out S $68000-78000/MFJ $105000-$125000/

Roth IRA contribution limitation and phaseout

$6000+1000(over 50) phaseout S 125000-140000/MFJ 198000-208000

qualified distribution from a Roth IRA.

Qualified distributions from a Roth IRA are not included in the taxpayer's gross income and are not subject to the 10% early withdrawal tax. To be a qualified distribution, the distribution must satisfy a 5-year holding period and must be (1) made on or after the date the individual attains age 59 1/2; (2) made to a beneficiary (or the individual's estate) on or after the individual's death; (3) attributed to the individual being disabled; or (4) used to pay qualified first-time homebuyer expenses. meets the requirement will have withdraw tax-free.

If neither you nor your spouse is covered by an employer retirement plan for any part of the year, the maximum allowable deduction for contributions to a Roth IRA is

contributions to Roth IRA are not tax deductible, unlike in traditional IRAs. however, qualified distributions are tax free.

the primary purpose of an account for qualified tuition program, an account for qualified higher education expenses.

to provide for a beneficiary's qualified higher education at an eligible educational institution.

Martin, age 35, made an excess contribution to his traditional IRA in 2021of $1,000, which he withdrew by April 18, 2022. Also in 2021, he withdrew the $50 income that was earned on the $1,000. Which of the following statements is true? 1, Martin must include the $50 in his gross income in 2021. 2, Martin would have to pay the 6% excise tax on the $1,050. 3, Martin would have to pay the 10% additional tax on the $50 as an early distribution. 4, Martin would have to pay the 10% additional tax on the $1,000 because he made a withdrawal.

premature distribution of $50 must included in gross income and pay the 10% additional tax on the $50 as an early distribution.

Elvin is single, age 35, and has total wages of $70,000. His adjusted gross income is also $70,000 before any IRA contribution. Elvin works for the Murphy Corporation, which sponsors a retirement plan that Elvin participates in. In addition, Elvin contributes $6,000 to his IRA account. What amount can Elvin deduct on his 2021 income tax return?

remember! $2400 is amount phaseout, $6000-$2400= the amount that can deduct on income tax return.

Sec. 529 plans

up to $10000 may be used to pay principal and interest on student loans for the beneficiary as well as the debt of the beneficiary's siblings. the amount of distributions for loan repayment of any individual is limited to $10,000 lifetime. qualified higher education expenses allowed to be paid with distributions from a sec. 529 plan include room and board for students that are enrolled at least half-time. in determining the tax-free distribution, all eligible education costs must be reduced by any scholarships, grant, and other financial aid. if more money than is needed is withdrawn from a sec 529 plan, taxes and penalties can be avoided if the money is recontribute within 60 days. childcare is nor eligible expenses.

Paul, a full-time graduate student at a state university, incurred the following expenses related to his attendance in the current year: Off-campus housing $7,800 Utilities $3,200 Books, fees, and supplies 2,500 Computer entertainment software 700 Internet access 350 Paul's tuition was paid through scholarships. Annual housing allowance for the university is $10,000. How much of Paul's expenses may be paid with Sec. 529 funds?

$12850. if a student lives off campus, she can use SEC.529 funds to cover the cost of rent and utilities up to the college's housing allowance. cost of internet access is also a qualified expenses. thus, the eligible expense include $10000 of the housing and utility cost, $2500 for books, fees and supplies and $350 for Internet access.

Kramer (age 63) established a trust and named his second wife, Theresa (age 50), as income beneficiary for 20 years. After 20 years, Kramer's son Trevor (age 40) and nephew Bob (age 25) are to receive lifetime income interests. Trevor died 22 years after the trust was established, and Bob died 34 years after the trust was established. After the death of both Trevor and Bob, the remainder passes equally to Kramer's granddaughter Sara (age 20) and great-granddaughter Hope (age 1). Assuming both Sara and Hope were alive when Bob died, how many times is the generation-skipping transfer tax levied?

Trevor and bob are one generation below the transferor and are non-skip persons. there is no taxable termination on trevor's death since Bob, a non-skip person, has an interest in the trust. both Sara and hope are skip persons, so there is a taxable termination on bob's death.