Tax Benefit of a Retirement Account
Measuring the advantage
February 4: Depending on your situation, a Roth conversion may increase the tax benefit you get from your retirement account.
Before we can look at that issue, we need a clear idea of what we mean when we refer to the tax benefit produced by a retirement account.
details: Tax Benefit of a Retirement Account
Fairmark.com offers books, free online guides, and other resources dealing with taxes and investing.
The Roth Conversion Benefit No One Understands
Roth conversions aren't wise for everyone, and many people will see only modest benefits from this strategy. Few people recognize, though, that some taxpayers, especially the wealthiest, can reap huge benefits.
details: The Roth Conversion Benefit No One Understands
RMD and Roth Conversion
With new interest in Roth conversions, more people are likely to make a mistake involving required minimum distributions. It's a mistake to violate this rule, but the consequences aren't as bad as many people fear.
details: RMD and Roth Conversion
Covered Call Caution
January 15: Selling covered calls looks like a great strategy. You profit even when your stock breaks even, and get at least a partial offset to the loss when your stock goes down.
details: Covered Call Caution
Impending Estate Tax Quagmire
Congress failed to prevent a temporary lapse in the estate tax, but may address this situation by reinstating the tax retroactively. If so, the law as it applies to people who die during the period of retroactivity may be in limbo for years while a possible constitutional challenge winds its way through the courts.
details: Impending Estate Tax Quagmire
Extension of Homebuyer Credit, with Changes
A new law extends the $8,000 homebuyer credit through April 30, 2010, and also changes the rules for this credit. Some of the changes took effect November 6, the day after President Obama signed the bill. The new rules may help or hurt, depending on your situation.
details: Homebuyer Credit Critical Changes
Bad Planning Penalty: Year of Hard Labor
You've heard this before: you're making a big mistake if you don't preserve that 401k account at termination of employment. Plenty of people go ahead and drain the account anyway. What if they faced a really severe penalty for making this mistake — something like a year of hard labor? In many cases, they do.
details: Bad Planning Penalty: Year of Hard Labor
Bank Bonuses? Don't Make Me Laugh
Once again mistaking himself for a pundit, our author comments on those huge bonuses being paid by the banks. Too much irony? Not enough?
details: Bank Bonuses? Don't Make Me Laugh
Buffett's Op-Ed a Year Later
A year ago the New York Times published an op-ed piece by legendary investor Warren Buffett under the headline, "Buy American. I Am." His suggestion to invest in stocks, coming at a time when the sky seemed to be falling, met with skeptical reaction. Here's a look back.
details: Buffett's Op-Ed a Year Later
Inflation Adjustments Available
Most of the tax numbers that are adjusted annually for inflation are now available for 2010. Because of low inflation over the past year, many of these numbers remain unchanged, or change in insignificant amounts. Some of the numbers relating to retirement plans would go down except for a rule that prevents a reduction in benefits for these numbers. As a result, the main limit on 401k contributions remains at $16,500, even though the calculation says it should go down to $16,000.
details: Reference Room
No Clunker Required
The "cash for clunkers" program soaked up so much attention that many people may not be aware that there's a special tax benefit still available for autos, light trucks, motorcycles and motor homes bought by the end of 2009. This special rule allows you to deduct sales and excise tax on a qualifying purchase. Depending on your situation, you may already be in a position to deduct sales tax on your auto (or other) purchase, but this rule will make the deduction available to many people who would not otherwise qualify, or who would qualify only by giving up some other tax benefit.
details: No Clunker Required
Mortgage Interest Deduction Increased
Taxpayers who took out a mortgage for more than $1,000,000 in purchasing their homes may benefit from a new IRS interpretation of the law. Contrary to the approach taken by the Tax Court in two memorandum decisions, the IRS says the amount above $1,000,000 can be treated as home equity indebtedness, potentially increasing by as much as $100,000 the amount of mortgage debt for which interest payments are allowed as a deduction. Taxpayers may wish to amend prior year returns to take advantage of this new interpretation.
details: Mortgage Interest Deduction Increased
Capping the benefit from itemized deductions
The Obama administration has proposed a controversial change in the tax law that would put a 28% cap on the benefit high-income taxpayers get from claiming itemized deductions. We have an explanation of the proposal here:
details: Capping the Benefit from Itemized Deductions
The proposal includes adjustments in the calculation of alternative minimum tax (AMT). In this companion article we explain why one of these adjustments makes sense and the other does not:
details: Itemized Deduction Cap Under AMT
More articles
Roth Conversion Loophole Closed (direct conversion of 401k distributions)
Payroll Taxes: Pay or Else (painful penalty imposed on responsible person)
Understanding Option Valuation (insight without the complicated math)
How Much Did You Lose? (take the long view on stock market performance)
Selling a Life Insurance Policy (IRS gives guidance on tax effects)
Repealing Check-the-Box (proposal to collect more tax from multinational companies)
Credit Card Fees for Tax Payment Deductible (IRS has changed its position)
April 15 Reminders (various things to keep in mind as the deadline approaches)
Tax Help for Madoff Victims (IRS issues guidance)
Refundable AMT Credit (a complete guide)
Isolating 401k Basis for a Conversion (technique for a tax-free Roth conversion)
Site Summary
Fairmark.com is your home base for news, guidance and other help in dealing with taxes and investing.
- Our books: click here to shop
- Tax return help: click here for tips and recommendations
- Online guides: click here for list
- Message board: click here to read or post messages
- Reference Room: click here for tax rates and other numbers
- News archive: click here for more news and features
Product announcement
All up to date
New, 2009 editions of all our books are now available. Shop here.
2009 filing season
Filing Recommendations for 2009 Filing Season
Here are our recommendations for the fastest, easiest, best and cheapest ways to file your income tax returns this year.
details: Filing Recommendations for 2009
Recovery Rebate Credit for 2008
Income tax forms for 2008 have a place to claim something called the recovery rebate credit, relating to the stimulus payments sent out during the year. Many people are making mistakes on that line of the return. Here's how to get it right.
details: Recovery Rebate Credit for 2008
Where's My 1099?
A change in the tax law means you may not receive your Forms 1099 until weeks later than you expect them. This change coincides with calendar effects to push the receipt of these items, normally expected around the end of January, into late February.
details: Where's My 1099?
