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  • Okay. In our last session, we started with Chapter 3. So I want to just back up and just

  • review just slightly and then I want to do a problem on our rental and then we will continue

  • on and hopefully be able to finish this chapter in this session, which I'm pretty sure we

  • should be able to finish this chapter. We started off Chapter 3, just to do a little

  • review before we work on a problem, is that we started off talking about our rental income,

  • and we began by talking about when -- what type of rental may you have. You may have

  • a rental that's considered, I'm sorry, primarily for personal purposes, where you have just

  • little incidental days and none of that income is going to be taxable to you and you can

  • take your mortgage and interest on your Schedule A. Or you may have a rental that is deemed

  • to be primarily rental use. In that case, it's really rental and you just have a couple

  • of personal days, not to exceed 14 days or 10% of the rental days. And in that instance,

  • you want to allocate your expenses between the rental and the personal days and then

  • you can deduct your expenses, including a loss on Schedule E.

  • And then you may have a rental that's considered primarily rental/personal split, kind of a

  • dual purpose. And in that instance, you still allocate the difference between the two, but

  • you cannot take a loss. You're not allowed to take a loss on that particular rental,

  • and in that instance, you can only deduct your expenses up to your income. So that's

  • -- we start it there. And so what I want to do just briefly is I want to do a problem

  • just to kind of -- we didn't get a chance to do that. So I want to do a problem.

  • And so if you look in the back of Chapter 3, and we're going to look at number 2, which

  • appears on Page 3-34. Okay. So let's look at that problem, number 2, which appears on

  • Page 3-34. And let's just do that quickly and then just so you kind of get an idea of

  • how that works. We have Shari, she runs her vacation home for six months and lives in

  • it for six months. During that year, her gross rental income during the year was $4,000.

  • The real estate taxes is 950. And then the interest on the home mortgage was 3,000. And

  • utilities and maintenance was 1800. And the depreciation was 4,500.

  • So with hers being 50/50, even without going to the calculations, that is going to be a

  • dual, a rental/personal split because her rented days equal her -- her rental days were

  • more than 15 days and her personal days were the greater of 14 or -- 14 days or 10%, so

  • we know that's going to be that split. So let's look at what we need to do for this

  • problem, and this is problem -- this is problem number 2, or question 2 that's on Page 3-34.

  • That's on Page 3-34. So they tell us that she had rental income

  • for the year of $4,000. So rental income was $4,000. And because this is a dual property,

  • then she is only going to be able to take expenses up to her income. She's only going

  • to be able to take expenses up to her income. And remember this is 50/50. So we have to

  • consider that as we allocate the expenses. So the expenses that she's able to deduct

  • or that they're able to deduct is we have to deduct them in that order. We first start

  • with the real estate taxes, and that's the first. And the real estate taxes were 950,

  • okay. And for the real estate taxes, because this was half personal, half rental, we can

  • only take half of them. So we're only going to take half of those.

  • And then also we're going to look at the rental portion for the interest, for the interest.

  • And the interest on the home was 3,000. And so we can only take half of those.

  • Okay. So when we're looking at they're telling us the order in which we have to take them

  • in, we started off with 4,000. She gets to deduct half of the taxes and then half of

  • the interest, and so that leaves her 2,025 of income in which she can deduct expenses

  • against. The next thing in order, they tell us to take the other items, the utilities,

  • maintenance, anything else that you may have before depreciation, and in this instance

  • she had utilities and maintenance expenses of $1,800. So we had utilities and maintenance

  • expenses of $1,800. Okay. But she's only going to get half of

  • that, once again, because half of it's personal, half of it's business. So we only want to

  • take half of that. And that gets us down to 1,125 left of income in which she can deduct

  • expenses against. And the depreciation, which is what's left, the depreciation on it is

  • $4,500. Okay. Technically she would be able to take half of that, which is -- which would

  • be 2,250. But we don't have enough income left to take that. So we're only going to

  • take what's left because we cannot take a loss.

  • We cannot take a loss. So net income ends up being zero. We deduct

  • it, depreciation of 1,125. We deducted utilities and maintenance of 900. Interest of 1500 and

  • we deducted taxes of 475. So those are expenses that we're allowed to deduct. Up to the income.

  • So you cannot take more than the income because that was a split.

  • Now, had this been a piece of property that was not a split and we could have taken or

  • had it been primarily rental, we could have taken all the applicable -- and let's just

  • say it was still 2,050, we could have taken all the applicable depreciation and, therefore,

  • we would have been able to take a loss of 1,250 -- 1,125.

  • So that is the difference between on our rental. So I just kind of wanted to back up and do

  • a problem together so that you kind of understand the calculations and how they work for this

  • when we're dealing with our rental. So that's where we started on -- in our last

  • session, started talking about our rental, and then we went over our passive loss rules,

  • we went over the real estate being a passive activity and the possibility of taking up

  • to a $25,000 loss there, and then we ended up by looking at our bad debts. So that's

  • where we want to start, basically where we left off there, where they're talking about

  • our bad debts, where they're talking about our bad debts.

  • So let's look at -- let's get you on the correct page that we're on and then we'll pick up

  • at that point. At the bottom of Page 3-8, we start bad debts. Basically when we're talking

  • about businesses, just briefly, we're really talking about uncollectible accounts receivables,

  • and we spoke about the -- the situation where it has to be a situation that you've taken

  • the income on it in order to be able to take the bad debt on it. Then we looked at business

  • bad debts, and basically debt from a trade or business is going to get an ordinary income

  • deduction and it's going to be taken against ordinary income on Schedule C. It's going

  • to be taken against ordinary income on Schedule C.

  • And so now we want to pick up at our non-business bad debt. These are our personal debts. And

  • so basically these particular debts, all these other bad -- and let me blow that up so you

  • can see that -- all these other bad debts, these are going to be taken or considered

  • short-term capital losses. They're going to be considered short-term capital losses. And

  • they're going to be limited to a $3,000 loss each year against ordinary income.

  • So the most loss that I can take and offset my regular income is going to be $3,000. If

  • I had more than that, any unused amount can be carried forward, okay. And this is all

  • done on Schedule D. It's going to be all done on Schedule D. It's going to be done on Schedule

  • D. So kind of like what I'm referring to, let

  • me get a little space, is that if I had this loss of $10,000, okay, kind of as an example,

  • let's say I had a loss of $10,000, and then I also had -- I can only take -- I'm sorry,

  • if I had a bad debt of $10,000, I can only take 3,000 of that. The other 7,000 is going

  • to have to be carried forward, okay. So that's the most I can take is the $3,000. The other

  • 7,000 is going to have to be carried forward. Okay. That's our bad debt. In this class we

  • do not cover inventory, so we will not cover that as you're looking through your text.

  • And then they deal with net operating losses, which that is not covered in this basic income

  • tax class either. And so now I want to pick up and we want to deal with the rest of our

  • session, this particular class period, and we want to deal with retirements. We want

  • to deal with retirements. How do we deal with IRAs, individual retirement

  • accounts? And that starts on Page 315. So we want to pick up there and that's what we

  • want to cover and look at. Okay. IRAs, or individual retirement accounts,

  • there's two types. There are -- there's a traditional IRA and then there is a Roth IRA.

  • Okay. So we want to look at both of those. The traditional IRA and then the popular Roth

  • IRA. Traditional IRAs are deductible. You make deductible contributions, meaning when

  • I put money in, it is a deduction for me. But when I take money out, my distributions

  • are taxable. So you have deductible contributions and taxable distributions for a regular IRA.

  • Okay. For a Roth IRA, you have non-deductible contributions. So when I'm making contributions

  • to my Roth IRA, I cannot deduct them. And my distributions are not taxable. So I have

  • non-taxable distributions. Okay. So when we're looking at an IRA, we have if

  • it's traditional all my -- not all. We're looking at there's some limits. My contributions

  • are going to be deductible, meaning I get to deduct it from income, and my distributions

  • are going to be taxable. So when I begin to draw, there's a portion that's going to be

  • taxable. The Roth on the other hand, as I make contributions to it, they're not going

  • to be deductible, but my distributions will not be taxable. Okay.

  • And then the earnings on both of these, the earnings on both of these are not taxable.

  • So current earnings. So basically, as you leave the money in there and it earns money,

  • those current earnings are not taxable. So current earnings are not taxable.

  • Okay. So let's begin to focus in on first starting

  • with our contributions to traditional IRAs, our contributions to traditional IRAs. First

  • of all, for those contributions to a Roth or a traditional IRA, you have until April

  • the 15th, in this case for a 2008 return, you would have until April the 15th of 2009

  • to make that contribution. So you're not tied by the end of the year. You have until April

  • the 15th in order to make that contribution. For a traditional IRA, the maximum contribution

  • amount is going to be the lesser of 100% of earned income, meaning all my income, if that's the

  • lesser number. The lesser of 100% of earned income or $5,000, okay. And if you're married

  • filing jointly, it could possibly be 10,000, which it would be $5 apiece, and so you can

  • take, if you can take that additional $5,000 for the spouse. Okay. We're going to look

  • at when those rules apply. So if we can end up taking that additional 5,000, technically

  • you can get up to 10,000 on a return. And then they have what they call some catch-up.

  • They have what they call catch-up contributions. You can make an additional thousand in catch-up

  • contributions, and this is only for taxpayers and spouses who are age 50 and over. Okay.

  • So if you're 50 and over, I can even make an additional, so it can be up to $6,000 per

  • person for the -- for that purpose. Okay. So there's a possibility that a portion or

  • your contributions could not be tax -- I mean not be deductible. Generally, the contributions

  • to an IRA is deductible, but it depends on whether you're already participating in a

  • plan. It depends on a number of things as to whether it's going to be deductible or

  • non- -- end up being non-deductible. So if we look on Page 3-16, and we look at

  • the chart at the top of that page and we're going to look at a couple examples as well

  • when it comes to that. So there's a possibility that this $5,000 that I can take, maybe all

  • my $5,000 may not be deductible. Okay. So let's look at the chart at the top of Page

  • 3-16. That chart is titled 2008 AGI Phase-out Ranges for Traditional IRAs. So we're talking

  • about traditional IRAs. So they have a column for the taxpayer and then they have a column

  • for the phase-out range. So if you are single and you're filing head of household and you're

  • not a plan participant, so that means that I am not participating in a plan at work,

  • I'm not already in a retirement type plan, there's no phase-out, so therefore, I can

  • contribute the $5,000 and get the full $5,000 deduction.

  • If I am single or head of household and I am in an active plan, so I do also have a

  • plan at work, if my income is between 53,000 and 63,000, there's a possibility that I will

  • not get a portion. There's going to be a portion of mine is phased out. If my income is over

  • 63,000, I won't get to take the deduction at all. Doesn't mean I can't make the contribution.

  • It just means it's not going to be deductible. If I'm married filing joint, and both are

  • in -- both are in an active plan, meaning me and my spouse both, and if our income's

  • between 85,000 and 105, there's going to be a phase-out of the amount of deductions we

  • can get. If it's over 105, we're not going to be able to get that deduction.

  • And so I won't read the rest of the chart to you, but that's how the chart works, okay.

  • It also tells us, note, and we're going to look at an example of this, because they have

  • three good examples in this particular textbook. It says when one spouse is an active participant

  • in a retirement plan and the other is not, so if we got one in, one out, two separate

  • income limitations apply. One is going to apply to the one who is not, the other one

  • is going to apply to the one who is. The active participant spouse may make a full deductible

  • IRA contribution as long as the income is not between 85,000 and 105, which is the phase-out

  • range. The spouse who had no active participant,

  • the spouse who wasn't actively participating in the plan, sorry, then they're going to

  • get the full deduction, okay, unless joint income is higher than 159 and 169. So even

  • though we may use separate qualifications, the income amount that we're going to use

  • is going to be the joint, them combined together. So even though we may end up doing that, okay.

  • So that is your traditional one. So let's write a note and then we'll look

  • at the exercise. So but due to income limitations, so it's going to be based off your income. That's what they're

  • looking at. Due to income limitations, okay, all of the 5,000, and I know it possibly could

  • be 6,000 or 10,000, all of the 5,000 maximum amount may not be deductible.

  • Okay. So let's start by looking at the example, the first example that's on Page 3-16. Let's

  • look at that example. Ed, age 31, is single and is covered by a retirement plan. If his

  • modified adjusted gross income is 59,000, Ed's maximum deductible traditional IRA that

  • he can deduct is $2,000. It's $2,000. And the way they got that, let me go ahead and

  • show that even though it's in the book. But Ed, he had income of 59,000, okay. He was

  • single. Okay. And he was also already covered by a retirement plan. So single, active plan

  • participant, I'm sorry, the range is 53,000 to 63,000. And so because he falls in the

  • middle of that, then he's going to get a portion of it. If his income was over here, then he

  • wouldn't get to deduct any of that, okay. So what we do is we take the upper limit,

  • which is 63,000, minus Ed's income, okay. And that gives us 4,000. So he is -- he has

  • 4,000, as they say, left in the range to deal with. And so that's how you kind of determine

  • how much or how do we -- how much we're going to give him, the phase-out. And then we divided

  • by 10,000. The 10,000 comes from 53,000 and 63,000, there's 10,000 in the range. So there's

  • $10,000 in the range and that's how they get the $10,000.

  • So we take 4,000 divided by 10,000, and then we multiply it by 5,000. You multiply it by

  • 5,000. So that represents the allowed deduction portion. So he's going to end up getting a

  • $2,000 IRA deduction. Okay. Now, he can contribute the full 5,000,

  • nothing says that he can't. He can contribute the full 5,000, but he's only going to get

  • a deduction for the 2,000. So 40% ends up he's getting -- he's able to get a 40% deduction.

  • Okay. Let's also look at the example that's at the

  • top of Page 3-17. This is when you have two different people. I like this example as well.

  • Paul and Lucy are married and both 36 years old. Lucy is covered by a plan and earns $57,000.

  • So we got Lucy. So I'm visual, I have to see these things. She's covered -- she's covered

  • by a plan and she earns $57,000. Paul is not covered. So Paul is our not covered person,

  • okay. Paul is not covered by a retirement plan. He earns 57,000. So we have her, Lucy's

  • 57,000, and we have Paul's 50,000. So their total income is 107,000.

  • So we're looking at the charts, that's what we want to look at is the 107. Lucy cannot

  • make a deductible contribution because if we look, married filing jointly and we have

  • one active participant, okay. When we have one active participant, then the active participant

  • spouse, if you look at the top of Page 3-16, the active participating spouse, the phase-out

  • range is between 85,000 and 105,000. So given that, if Lucy makes a $5,000 contribution,

  • it is not deductible. Okay. So Lucy cannot deduct hers because it falls on the outer

  • range. It falls on the outer range. Okay. If you look for the not active participating

  • spouse, the range for Paul is going to be between 159, so it's higher, and 169. So since

  • their income is not in the range or the phase-out range, that means Paul gets to make a $5,000

  • deduction and it's going to be deductible. Okay. So in this case, one spouse's is not

  • deductible and the other spouse's is. So because one is a participant and one is not, we look

  • at two different line items on the chart and two different qualifications. So it's very

  • well that one could be and one could not. Okay.

  • Now, one thing we want to pick up there and talk about is we want to talk about the Roth

  • IRA. So even though in this case Lucy could not make a deductible contribution to a traditional

  • IRA, there's a possibility that she could make a contribution, because remember they're

  • not deductible anyway in a Roth IRA, so she may choose to make a contribution to a Roth

  • IRA. Okay. So if we look at the Roth IRA, they begin

  • to talk about that and a Roth IRA, as far as the contribution amounts, they are the

  • same as the traditional IRA. So they're going to be the same as the traditional IRA, and

  • so these rules are going to apply. So they apply for a traditional IRA and they are also

  • the same for a Roth IRA. So same. So the contributions are going to be same.

  • Now, the difference is, is that the phase-out, a little different. If we look at the bottom

  • of Page 3-15, so you want to look on Page 3-15 for the phase-out. Okay. 2008 phase-out

  • ranges for Roth IRAs. And with the Roth IRA, if you are an active plan participant or not,

  • versus not doesn't matter. So that's not what we're looking at here.

  • We're just simply looking at income amounts. So single or head of household, the phase-out

  • range is between 101 and 116, and for married filing jointly the phase-out range is between

  • 159 and 169. Okay. So it doesn't matter if you're an active plan

  • participant or not. So let's look at an example. They have an example that I want to look at

  • and kind of walk you through on Page 3-16. And it's the last one that deals with the

  • Roth. It says Ann, who is 36, would like to contribute 5,000 to her Roth IRA. However,

  • her AGI is 110. So we got Ann. She's got AGI of 110. So when we look at our AGI phase-out

  • range for a -- and she's single, so the range is between 101 and 116 for a single person.

  • So her number falls in between that range, means that it's phased out. Just like with

  • the other one, if it's over 116, that means she gets no deduction. If it's -- if her AGI

  • is less than 101, that means she would get the full deduction. Okay.

  • So she wants to make a $5,000 contribution, and what we want to do is a similar calculation

  • when we did the phase-out before. We want to take the upper limit of 116 and subtract

  • from it her income, the 110. And when we do that, we get $6,000. Then we

  • want to divide that $6,000 by 15,000, similar to what we did on here, 101 to 116. There's

  • a $15,000 range. So that's how we get our bottom number.

  • And so then we want to multiply that times our $5,000 and it just happens to be 2,000.

  • That's because that comes up to be 40% again. So that's how she would determine for her

  • Roth IRA how much of her contribution she can make, how much of her contribution she

  • can make. And that is at the bottom of Page 3-15.

  • So if you go back to Lucy, if we go back to our example up here, remember, they had -- let

  • me show you this. Remember, Lucy $5,000, not deductible. Their total AGI was 107, and so

  • if we look at the married filing jointly range, theirs would be 159 to 169. So she would be

  • able to make that full $5,000 contribution to an IRA. So she would be able to make the

  • full $5,000 contribution to an IRA, which would be good. Which would be good.

  • Okay. So let's continue. Now, those deal with the

  • contributions to an IRA, are contributions to an IRA. We want to look at now how do we

  • handle the distributions, the money that comes out? How do we handle the money that comes

  • out of an IRA? So when we talk about distributions, we're talking about withdrawals. When we talk

  • about distributions, we're talking about withdrawals that we take out or that are coming out. Okay.

  • For a traditional IRA, those withdrawals are taxable as ordinary income. So basically they're

  • taxed at your regular ordinary income rate, okay. They could very well be subject to a

  • 10% penalty and you can't take them out -- or to keep you from being subject to that penalty

  • along at 59 and a half. Okay. Now, there are some situations that you can

  • take it out penalty-free before you're 59 and a half, and so those you want to look

  • at. So for penalty-free withdrawals that you make before you're 59 and a half, we want

  • to look at Page 3-17 for those. We want to look at Page 3-17, at the bottom. If you're

  • disabled, they give us a couple of them. Using a special level payment option, if you're

  • using the withdrawal for medical expenses in excess of 7.5% of your AGI, if the recipients

  • have at least 12 weeks of unemployment compensation. So this is very important as our economy finds

  • ourself in a situation where we have -- may have a number of people unemployed and to

  • the extent that they're paying medical insurance premiums for their dependents. So keep that

  • in mind. Paying the cost of higher education, including

  • tuition, fees, books, room and board for the taxpayer's, their spouse, children, or grandchildren.

  • So if you're using it for that purpose. Or a withdrawal of up to $10,000 for first-time

  • home buyers. So you could also use that as well for first-time home buyers.

  • So you can very well take it out penalty-free before you reach the 59 and a half. You're

  • still going to have to pay ordinary income tax on it. So you didn't alleviate that. But

  • what you do is you alleviate the penalty. Okay. And one last note on those is that those

  • withdrawals, you can't make them before 59 and a half, but you have to begin to make

  • them by the time you reach 70 and a half. So minimum annual distributions are going

  • to be required at 70 and a half. I think I said 79, but 70 and a half. So can't make

  • it before 59 and a half. If you -- and if you reach 70 and a half and you haven't started

  • withdrawing money out of those IRAs, you need to make those minimum annual distributions,

  • and there's some charts and some calculations that goes along with that, what's considered

  • -- what IRS considers to be minimum. Okay. Next, what about our withdrawals or

  • our distributions from a Roth IRA? These withdrawals are tax-free and they're tax-free after five

  • years, okay. If not, if it's not a five-year, let's look at one through four that's going

  • to be on Page 3-18. So let's look at that. 3-18. Okay. For your Roth. For your Roth here,

  • it tells us that you have a five-year holding period on your Roth if any of the following

  • requirements are satisfied. So hold it for five years, you can withdraw if these items

  • are done. The distribution is made on or after, which you're 59 and a half, so we still have

  • that age limit on there. The difference is, is that you only have a five-year waiting.

  • The distributions is made to a beneficiary or a -- after a participant's death. So if

  • it's being distributed because it's a death of an individual, of the individual, the participant

  • becomes disabled, or the distribution is used to pay for qualified first-time home buyer

  • expenses. So once again, you can use it for a home buyer expense.

  • They have an example here on this page I want to look at. Bob establishes a Roth IRA at

  • the age of 50 and contributions -- and contributes the maximum each year for 10 years. The account

  • is now worth 61,000 consisting of 35,000 of non-deductible contributions. So that means

  • he put 35,000 of his own money, so it's not deductible, and 26,000 of earnings that have

  • not been taxed. So over those 10 years, $26,000 of earnings. Okay.

  • Get back to where -- Bob may withdrawal the 61,000 tax-free from the Roth IRA because

  • he is over 59 and a half, because he started at 50, now he's 60 and has met the five-year

  • holding period requirements. So he's met those. And the thing about that

  • is that it grew tax-free, so he's not having to pay tax on $26,000 worth of earnings, which

  • is huge! If he would have put that same amount of money in a traditional IRA, he would have

  • got the deductions for those contributions, but he would have paid tax on those withdrawals,

  • on that earnings piece. He would have had to pay tax on that.

  • Okay. So basically let's say that I didn't meet

  • that. Let's say that I'm not 59 and a half and I withdraw that money, okay. So the taxable

  • situation with that one, so it's going to be taxable if the requirements are not met.

  • So it's going to be taxable if the requirements are not met. And basically the way it works,

  • the return of capital, meaning my portion that I put in that I didn't get a deduction

  • for, I'm going to get it back tax-free. I'm not going to have to worry about still paying

  • tax on that. But the earnings is going to be taxable to me. The earnings is going to

  • be taxable to me. So I lose that tax-free part of the earnings. I'm going to lose that

  • tax-free part of the earnings. If we keep looking back at that example on

  • Page 3-18, they give us another example. Assume the same facts in the above except that Bob

  • is only the age 56 and he receives distribution of $10,000. Remember, he contributed starting

  • at 50 and so now he's 56 and he receives a $10,000 distribution. He has put in some money.

  • In that instance, after ten years he had put in 35,000 and had earnings of 26.

  • So situation is that now he's 56 and he receives a distribution of 10,000. Assumes that his

  • adjusted basis for the Roth is 12,000, meaning contributions made of 2,000 for 6 years. So

  • let's assume he made $2,000 contributions for 6 years, okay. The distribution is tax-free

  • and his adjusted basis is reduced to $2,000. So because he had put in 12, he got a distribution

  • of 10, all that's tax-free. That's just like getting his money back. That's getting his

  • money back. So that would be tax-free.

  • Okay. A couple things I want to point out before we move away from our Roth, if you

  • turn to Page 3-17 in your book, they talk about taxpayers transferring Roth -- traditional

  • accounts to Roth. It tells us taxpayers with AGI not more than 100,000 may benefit from

  • the rule allowing conversions of regular IRAs into Roth IRAs. Okay. Although that conversion

  • is going to be subject to current income taxes, because remember, those distributions from

  • a traditional IRA are going to be taxable, taxpayers with certain factors in favor such

  • as many years to retirement, may mean they have a lot more years of retirement to go,

  • a low current tax break, it may be currently I'm in a very low tax bracket maybe because

  • of children, because of my mortgage on my home, so I have a pretty low tax bracket to

  • where a lot of times when people retire, they have no more mortgage deduction, the children

  • are gone, it's sometimes -- even though their income is lower, but sometimes their tax bracket

  • is higher due to the fact they don't have as many deductions anymore, and so they go

  • on say, you know, due to low current tax bracket or high expected tax bracket at retirement,

  • may wish to make the conversion, because then, when they begin to take their money out of

  • the Roth, that money is not going to be taxable to them when they're at the higher rate. Okay.

  • Keep in mind when I make the conversion, now I'm going to have to go ahead and pay tax

  • on that. It says also taxpayers with negative taxable income due to large personal deductions

  • may wish to convert enough of their regular IRAs to Roth IRAs to bring taxable income

  • to zero. So instead of it being negative, maybe they'll make a contribution to bring

  • it to zero. This way the conversion can be done with no tax cost since deductions which

  • would otherwise be lost because of the negative are offset now by the IRA income.

  • So they can use that IRA income to bring up their income so, therefore, instead of having

  • negative taxable income, they can at least have a zero taxable income.

  • Then it goes on to tell us for the years 2010 and beyond, the rule that require taxpayers

  • to have 100,000 or less AGI for this conversion that I just read from a regular IRA to a Roth

  • IRA accounts has been eliminated. So for the tax years 2010 and beyond, okay, that $100,000

  • limitation is gone. So Congress expects that many high income taxpayers will take the advantage

  • of this opportunity to pay income tax due upfront on those conversions.

  • So excellent opportunity to consider, just something to consider as you begin to look

  • at your Roth, maybe setting up a Roth versus a traditional. So just know there are some

  • IRS benefits out there for that purpose. There's some IRS benefits out there for that purpose.

  • Okay. On Page 3-19, they talk about a KEOGH plan or a simplified employee pension plan,

  • okay. These plans are plans that mostly we're looking at self-employed people setting up

  • plans, okay, for retirement for their purposes, so we're talking about a KEOGH plan, we're

  • looking at self-employed people. So if I'm self-employed, I want to set up this tax deferred

  • plan, so tax deferred retirement plan. Okay. So we're looking at self-employed tax

  • deferred retirement plan. Okay. And they call these KEOGH plans, okay. Now, for these plans,

  • the contributions are going to be limited to, meaning the amount that me as a self-employed person can put

  • in there is going to be limited to the lesser of 20% of my net earned income or $46,000.

  • Okay. So my contributions are going to be -- going

  • to be limited to the lesser of either 20% of my net earned income or $46,000. Okay.

  • They have also what they call SEP plans. SEP plans. Okay. And these are like simplified

  • employee pension plans, or they're IRAs as well. They're IRAs as well. The contributions

  • into these plans are going to be the same, the same as our KEOGH plans, and so 20% of

  • net earned income and $46,000, okay. Now, we want to be careful. We're going to have

  • some penalties as well with these plans. So to avoid penalties, you want to make sure

  • that your distributions from these plans are not before 59 and a half, and you want to

  • make sure you're making minimum distributions at 70 and a half.

  • So those same type rules apply when we're dealing with those particular plans as well.

  • Those same type rules apply when we're dealing with those particular plans. So you want to

  • make sure that you're not taking out before 59 and a half and that at 70 and a half you

  • make sure you're making minimum distributions, minimum distributions from those plans.

  • Okay. We have about five minutes left. And so I just kind of want to touch on, we still

  • in our beginning of our next session will have a little bit left to cover in here on

  • 3.8, they talk about qualified retirement plans, including 401(k)s, which are also important

  • plans. So I want to look at that. So let me just kind of briefly introduce the 401(k)s.

  • Basically employers, this is where employers is going to receive deductions for any contributions

  • they make that are made on behalf of the employee, okay. And as long as it is a qualified plan,

  • it's got to be a qualified plan, so when we're looking at those rules and those qualified

  • plan rules are on Page 3-20, okay, and so as we look at that, we're going to be looking

  • at a -- a defined contribution plan versus a defined benefit plan when we look at 401(k)s

  • and then we're going to look at how much can I contribute to a 401(k). A lot of times some

  • employers will match those contributions, and that's what I mean by the deductions that

  • they can get. And so what we'll do is we just have like

  • a page or two of Chapter 3 and then we're going to go ahead and pick up with Chapter

  • 5. We're going to look at itemized deductions. We will look at itemized deductions, Schedule

  • A deductions. So we'll wrap up these last two pages in Chapter 3, not cover Chapter

  • 4, and then we're going to pick up Chapter 5, which deals with itemized deductions.

  • So make sure you're reading chapters and make sure you're doing multiple choice questions

  • at the end of the chapter. You should be working on your multiple choice questions for Chapter

  • 3 and, therefore, ready to turn those in when we complete the chapter. That's it.

  • (Music.)

Okay. In our last session, we started with Chapter 3. So I want to just back up and just

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A2 初級 美國腔

基本所得稅--第六部分 (Basic Income Tax - Part 6)

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    王惟惟 發佈於 2021 年 01 月 14 日
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