Question re: Tax Deductible IRA contributions

[tinapbeana]

Re: Question re: Tax Deductible IRA contributions

Property tax is only $700? Where do you live so you could buy a house for $70K?

actually, the house is assessed for 74k, we offered 63k and only financed 60k instant equity.

i live in upstate SC, home of BMW, FUJI, Gerber, Lockheed, Fluor Daniel, etc... even better, my house is in a neighborhood walking distance to downtown and right on the edge of the most recent 'revitalization' project. i'm giving it 5 years before this street goes hoity toity...

the bad news is the current taxes are on the old assessment value of 56k, which means next years taxes will be about $930 based on our millage... the good news is the assessed value went up by over 32%, which means in another year or so our appraised value should be well over the 74k tax assessor's value.

[tinapbeana]

Re: Question re: Tax Deductible IRA contributions

Also, last year I donated clothes and household goods to various charities. I wrote down everything I donated, took pictures, kept the receipt and then used It's Deductible to calculated the value of the items. I was able to itemize these donations to the tune of almost $1500.00. Document and keep receipts and the money is yours! So since we are only in the 15% tax bracket this save us $225.00 in taxes. Something to think about for next year.

tax bracket is the whole reason i started this thread: i'm pretty sure mine is changing for the worse (higher). i guess you could say it's for the better since i'm making more, but i don't buy that! at any rate, chances are my tax bracket for fiscal 2006 will be lower than my bracket for fiscal 2007, so i was considering doing to 401k - ira - roth ira tap dance now so i wouldn't have to pay as much in taxes by doing it next year. at the same time, though, fiscal 2007 will see MUCH more interest paid on the house which will likely balance out any extra taxes i will see due to my shifting bracket.

stupid shifting bracket...

[creditcardfree]

Re: Question re: Tax Deductible IRA contributions

You are very wise to consider that. If you do the dance, I think roth conversions have to be done by Dec 31. I don't think you have the extension time frame. Double check with the irs on that one.

In 2005, my husband received combat pay...all tax free! So I used that low income year to convert his traditional ira to a roth, to the tune of about $10,000. We paid zero tax and received withholding back. Now after the fact, I'm trying to figure out why I didn't convert one of my $6000 accounts then too. UHH!

[vishenda]

Re: Question re: Tax Deductible IRA contributions

First of all, 401(k) contributions and IRA contributions do not figure into itemized deductions.

If your joint income was over $85,000, you are not eligible to deduct anything for 2006 for an IRA contribution. Your participation in the 401(k) during the early part of the year cannot be undone. If your joint income is under $75,000, you may still make a deductible IRA contribution; and if it is over $75,000 but less than $85,000 the amount of the allowed deduction will be limited.

[tinapbeana]

Re: Question re: Tax Deductible IRA contributions

income for 2006 is *well* under 75k. income for 2007 will be approx 74500 gross. riiiiiiiiiiiight under the wire!

[creditcardfree]

Re: Question re: Tax Deductible IRA contributions

income for 2006 is *well* under 75k. income for 2007 will be approx 74500 gross. riiiiiiiiiiiight under the wire!

And by continuing to contribute to a 401k this would reduce your gross taxable income. Then in addition, since you are married, you could also contribute to a traditional ira for $8000 taking the deduction, thus reducing your income some more. That assumes you have that much money to invest, too!!!

[tinapbeana]

Re: Question re: Tax Deductible IRA contributions

And by continuing to contribute to a 401k this would reduce your gross taxable income. Then in addition, since you are married, you could also contribute to a traditional ira for $8000 taking the deduction, thus reducing your income some more. That assumes you have that much money to invest, too!!!

well, that's part of the problem: the new company i started with in august doesn't offer a 401k, so next year will probably be roth only. and as much as i would love to contribute the mas for DH and myself, i'm probably going to focus on just mine at first, since DH has 401k at his office and has just signed up for it.

[safari]

Re: Question re: Tax Deductible IRA contributions

income for 2006 is *well* under 75k. income for 2007 will be approx 74500 gross. riiiiiiiiiiiight under the wire!

Next year (2007) the phase-out range for joint filers will be $80,000-90,000.

[creditcardfree]

Re: Question re: Tax Deductible IRA contributions

We'll it least it was good information for others to feast their eyes on!!

We max our roths out first. This year (2007) to meet our 15% goal, we will have to have my husband put some money in the TSP through the government...this is like a 401k but no match.

[tinapbeana]

Re: Question re: Tax Deductible IRA contributions

Next year (2007) the phase-out range for joint filers will be $80,000-90,000.

woohoo! that's good, cause i realized gross next yr will be 76500, just OVER the old wire. thanks for the info, safari

[vishenda]

Re: Question re: Tax Deductible IRA contributions

Yeah your 401(k) contributions has nothing to do with the standard deduction or itemizing. Youre thinking of the adjustment for a traditional IRA contribution in arriving at your AGI (adjusted gross income). And no, you cant deduct your IRA contribution b/c you already saved the taxes on this money when you contributed it to your plan.

Since you bought a house, you will have mortgage interest and real estate taxes to itemize on Schedule A. If it isnt enough to itemize in 2006, you will be able to itemize in 2007.