Photo: Courtesy / Pixabay
Withdrawing your retirement savings without the need to pay taxes through Roth IRA accounts has been without a doubt the best savings option thanks to earnings through tax-deferred means and tax-free withdrawals.
However, the option of having a Roth IRA retirement savings account is about to change because the new tax law – which is being discussed in Congress – seeks to eliminate these conversions by the end of the year.
These conversions not only apply to a specific sector, but to all, even for those people who earn more than $ 400,000 a year.
Until now, regardless of the state, A tax return or adjusted gross income can help convert retirement assets into a Roth account.
That is to say, those with traditional IRA money could convert them to Roths if they paid taxes; For example, if a person had $ 30,000 in a traditional IRA, they could add that same $ 30,000 to their tax income for the year, pay income tax, and convert their account to Roth and there were no more taxes to be paid in the future.
Now seeks through the bill to prohibit all contributions after filing taxes from employees in qualified plans, plus after-tax IRA contributions can be converted to Roth.
The prohibitions will be made, according to the House Ways & Means Committee, regardless of the income that is obtained. either for cash to make distributions, transfers and contributions made after December 31, 2021.
This law also impacts on the so-called “backdoor Roth “ It allowed high-income taxpayers to bypass the income limits for IRA contributions.
This congressional measure has major implications, one of which is that would end IRA tax extensions for those whose income is greater than $ 140,000 if their status is “single” or $ 208,000 if they are married and file a joint return.
As everything, there are caveats in the US tax code. which ensures that if you are above these income limits, but neither you nor your spouse are covered by a 401 or other retirement plan at work, you will still be eligible for a tax privilege with your IRA contributions.
It may interest you:
Major US Retailers Are Beginning to Adopt Buy Now Pay Later
The IRS would track all bank transactions over $ 600 under the Biden plan