One-Time Tax Savings for 2010

Tax Savings Before the End of 2010

A Special one-time Roth IRA conversion deal, and don't forget about the Education deduction I wrote about last month.

For 2010 only there is a way to delay taxes normally paid when converting a traditional IRA to a Roth IRA.  If you act before Dec 31, you can setback the tax bill by splitting your conversion income in half and reporting it on your 2011 and 2013 returns.  Remember, taxes could be higher by the time you pay your tax bill in full.  Before 2010 and starting again in 2011, taxes on this type of conversion will be assessed for the tax year in which you convert your IRA funds.

Why pay taxes for the privilege of owning a Roth IRA?

•1)      It might be your only way to have one: you can make regular contributions to a Roth only if your income is below IRS limits.

•2)      Qualified withdrawals are tax free: That also means they won't affect the taxability of your Social Security Benefits.

•3)      No required distributions during the account owners lifetime: the IRS makes you tap your traditional IRA every year after you turn 70½, but Roth IRAs can be left to grow - for yourself or your beneficiaries.

 As always, consult a tax and/or investment consultant when making these decisions.   

Karl Hess, Your Real Estate Agent on The Jersey Shore