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IRA Provisions Tax 1 Chap 9 Tax 3 - Chap 20 (indivs text)

IRA Provisions Tax 1 Chap 9 Tax 3 - Chap 20 (indivs text). (A) Taxpayer Relief Act of 1997. (1) Phase out of IRA deduction. effective after 1997 Active participant in ER plan; - no longer include indiv whose SP cov’d; - still a phaseout: But 150,000 - 160,000

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IRA Provisions Tax 1 Chap 9 Tax 3 - Chap 20 (indivs text)

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  1. IRA Provisions Tax 1 Chap 9Tax 3 - Chap 20 (indivs text) (A) Taxpayer Relief Act of 1997

  2. (1) Phase out of IRA deduction • effective after 1997 • Active participant in ER plan; - no longer include indiv whose SP cov’d; - still a phaseout: But 150,000 - 160,000 • For active participant - new phaseouts:

  3. MFJ Phaseout 98 50-60 99 51-61 00/01 52-62/53-63 02/03 54-64/60-70 04/05 65-75/70-80 05/06 70-8-/75-85 07 80-90 Single Phaseout 98 30-40 99 31-41 00/01 32-42/33-43 02/03 34-44/40-50 04 45-55 05 50-60

  4. (2) Roth IRA (Sec 408A) • Effective after 1997 • nondeductible contrib • up to 2000 (w/o consid of active partic rule) • No mand distribs (B4 death) • Contribs allowed even >70 1/2 • Phaseout 95-110 single, 150-160 MFJ

  5. After 5 yrs - distrib w/o tax or pen - (no tax on growth, nondeduc contribs returned) • 1) 59 1/2 • 2) to B after death • 3) disabled • 4) 1st time homebuyer - 10,000 limit (all IRA’s now except educ IRA)

  6. Other distrib > contribs - incl’d in GI + 10% early w/d Pen • Rollover from existing IRA; - not if AGI > 100,000 or MFS; - include (gen) amt taxable if w/d; B4 ‘99 include ratably over 4 yrs; - no early w/d pen • Total contrib limit all IRA’s 2000 (b4 phaseouts)

  7. (3) Educ IRA’s • Begin 1998, nondeduc 500/yr per B (under 18), 2000 after 2001 year • Non deduc 500/yr per B (benefit) (under 18) • Distribs - Qualif’d educ exps, <30 - excld’d B GI (exclus) • May rollover - to educ IRA of diff fam B - tax & pen free • Otherwise - distrib at age 30 - earnings taxable + 10% pen

  8. Cannot claim hope or life long Lrng credit same year as exclus • contrib = gift of pres int • Phaseout - mod AGI 95-110 single, 150-160 MFJ • Qualif’d educ exps - post second ed - tuition, fees, rm & bd; - at least 1/2 time for rm & bd

  9. (4) Pen free w/d IRA for higher ed exp (all IRA’s) • 10% pen early w/d not apply; TP, SP, child, GC; Qualif’d higher ed exp; - post second ed - tuition (CCH) fees, bks, supps, rm & bd; - includes grad ed (per comm report); - reduced by exclusions (Schol, svgs bonds, educ asst prog) (not - gift, inherit) • After 97 - exps pd after 97 for acad periods beg after 97

  10. IRS Restructuring & Reform Act of 1998 - Roth IRA & Educ IRA • Chap 20 (indivs text) - Roth IRA • Roth IRA - inc recog on rollover • trad IRA rollover to Roth - include in GI • full amount - deductible trad IRA • earnings - nondeduc trad IRA • prior law (97) conversion b4 99 (=98) - recog GI ratably over 4 yrs (beg 98)

  11. New law (98) option • recognize ratably over 4 yrs or • include entire amt current yr (election) • cannot change election after due date (normally 4/15/99) (extension?) • Restrictions under 4 year spread

  12. W/d of any converted amt = GI (when w/d) • recog max = w/d (?) • death of t/p accels recog unless surv sp inherits and surv sp elects same 4 yr period • this elec also irrevocable (after dec’s last return due date) • Effective - taxable years after 12/31/97

  13. Roth IRA - AGI limit on rollover to Roth from Trad • AGI limit 100,000 (97 law) • 100,000 limit not include GI from conversion rollover (trad to Roth) (98 law) (Relief Act (98 also) did not enact MFJ limit of 150,000 by 2004) • Effective - taxable years after 12/31/97

  14. Roth IRA - AGI limit on rollover • 100,000 limit not include req’d min distribs from IRA’s for indivs at 70½ yrs (min distribs not eligible rollover, still in GI) • Effective - taxable yrs after 2004

  15. IRS Restructuring & Reform Act of 1998 • Chap 20 (indivs) & Chap 9 • Educ IRA’s (clarifications on 97 law) • all distribs - ratable share of prin & earnings • Excess contrib - if remain in acct, 10% excise tax (pen) • treated as distrib’d - w/i 30 days after B reach 30 yrs or dies

  16. Rollover (tax free) (of Educ IRA) (3 Reqs) • to another educ IRA • upon death or age 30 of B • to new B = member of former B’s family (& under 30)

  17. Increased Traditional IRA Contributions Limits EGTRRA ‘01 • 2002 – 2004 3000 • 2005 – 2007 4000 • 2008 & later 5000

  18. Additional Traditional IRA (Catch up) Contribution EGTTRA ‘01 • Age 50 (by end of tax year) • 2002 – 2005 additional 500 • After 2005 additional 1000

  19. Modification Educational IRA Rules EGTRRA ‘01 • 2000 instead of 500 limit • mfj phase out 190 – 220 • Elementary & secondary school expenses included • Can claim HOPE or Lifetime Lrng same year but not same expenses • Corps can contribute regardless corp income and w/o phase out • Effective after ‘01

  20. New Credit – Contributions to IRA’s & Certain QRP’s • 2000 credit limit • Reduced by taxable distributions (current year, 2 hrs prior, & up to due date • Phase out AGI 25 (single) 50 (mfj) • In addition to any exclusion or deduction • Against regular tax & AMT • Not dependents or full time students • Calculated per table • Effective: after ’01 and before ‘07

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