Wednesday, April 18, 2012

Congress weights rolling back IRA deposit "tax shelter" which benefits many retirees

Congress is considering rolling back the ability of people to exempt 401(k) or IRA deposits from taxes, as a way to keep top rates “lower” according to GOP ideology, according to a story by Lori Montgomery, “Changes to tax breaks on retirement savings weighed; lawmakers seek reform options; Both parties looking to recapture money”, link here.

Retired people sometimes move additional money into IRA’s right before April 15 to reduce taxes, to a total of up to $6000 to offset “wage” income for seniors.  This may happen if there was more income than expected, such as K-1 income this year in my case. In some tax brackets, additional income causes “double taxation” because it causes the social security payment income to start getting taxed at up to 85%.

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