Are Roth IRA Contributions Tax Deductible?

Are Roth IRA contributions tax deductible?

The simple answer is no. But a more nuanced answer will note that although Roth IRA contributions themselves are not tax deductible, you can claim a Roth IRA tax credit or a claim a loss on a Roth IRA if eligible.

So let’s take a look at the various options at your disposal.

Non-Deductible Roth IRA Contributions

Unlike 401k or Traditional IRA contributions, Roth IRA contributions are not tax deductible. According to the Roth IRA funding rules established by the IRS, all your contributions must be made with after-tax dollars.

For example, let’s say you earn $40,000, and you’re in the 25% tax bracket. If you want to make a $5,500 tax deductible 401k contribution, you’ll put $5,500 in your 401k first and then you pay your taxes, which leaves you with $25,875 (75% of $34,500).

However, if you make a $5,500 non-deductible Roth IRA contribution, you’ll pay your taxes first, which leaves you with $30,000 (75% of $40,000). Then you’ll make your $5,500 Roth IRA contribution, leaving you with $24,500 in disposable income.
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2012 Tax Law Changes You Might Not Know But Should

2012 Tax Law Changes

Keeping track of all the different tax law changes is almost as difficult of keeping track of how many times my wife wants to make a slight decor change to the interior of our home. It’s impossible!

These tax changes are the main reason I do not envy being a tax professional. My CPA earns every penny I pay him!

It never fails that the IRS is going to implement some new updates. Many of these changes are noticed and I’m sure many older men sit around in their coffee circles to debate them.

But there are several changes that go unnoticed. Even some tax preparers make overlook them. Here’s a quick rundown.
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How to Value Your Clothes to Get the Biggest Income Tax Deduction Possible

Well it’s that time of year again. That time when the IRS wants us to send them all that tax stuff. It can be a stressful time of years for many people. Every time we send in our taxes we say, next year I will do my best to get all the tax deductions I can. We then let that falter through the year a bit. Then tax time comes again and we again start the worrying about having enough tax deductions.
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How to Get a Tax Rebate

As the new year gets underway in earnest, tax season is heating up. Many people are considering how they might end up with a tax rebate. A tax rebate is the refund of money that you overpaid to the IRS. If you had too much withheld from your paycheck, or paid more in quarterly taxes than you owe to the government, then you are due a rebate. But how do you get this rebate?
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What You Need to Know About Home Office Tax Deductions

Guidelines are strict when it comes to qualified expenses. With unemployment near an all-time high, many out-of-work job seekers are setting up shop in their own homes. A home office allows you to claim otherwise nondeductible expenses, such as utilities, depreciation, insurance and repairs.

To take advantage of home office tax deductions, you need to meet all of the very strict IRS guidelines. Be forewarned: the IRS reviews home office claims very carefully. To minimize your risk of an audit, and ensure success if your return is questioned, make sure you meet the qualifications for the home office tax deductions for 2011.
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Health Care Tax Deductions That You Don’t Want to Miss

You might think that there’s no way you can possibly have had enough medical-related expenses to be able to claim a health care deduction on this year’s tax return. In order to take advantage of this opportunity, you need to have spent more than 7.5 % of your AGI (Adjusted Gross Income). And then, you can only claim the monetary amount above that figure. Many taxpayers will be surprised at just how much they spend on health care. I know with our growing family we’re always (by “we’re” I mostly mean my wife) keeping tabs on our health insurance costs.  Our family is currently all through her employers coverage, and we’ve had to change a few times in the past year.
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Last Minute Tax Deductions

With so much controversy buzzing in Congress over taxes this year, it shouldn’t surprise anyone that there are a lot of headaches in store for those making higher salaries and bringing in larger incomes in the U.S. There are some people doing everything they can to lower their tax bill for 2010 while pushing offer deductions for the coming tax season in the hope they may go farther in 2011 should the tax rates increase.

Still, some are looking for those last minute tax deductions in order to get the best possible tax bill for the 2010. In fact for some families, many of whom are struggling in the weak economy, want to take advantage of these deductions to lighten the load or use it to open new doors of opportunity.
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