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Tax-advantaged retirement plans can help you lower
your current tax bill and achieve a secure retirement.
What’s more, recent legislation makes permanent higher
IRA and 401(k) contribution limits. They are due to
revert to their 2001 levels in 2010.
Individual Retirement Accounts (IRAs)
You may contribute up to $4,000 to fund a traditional or
Roth IRA in 2007. Those age 50 or older can make an
additional catch-up contribution of $1,000. The base
contribution will rise to $5,000 in 2008.
Traditional IRA contributions may be deductible
depending on your AGI and whether you or your spouse (if
filing jointly) are covered by an employer’s pension
plan. Roth IRA contributions are not deductible, but the
earnings accumulate tax-deferred and may be withdrawn
tax-free if you meet the qualified distribution
requirements. Eligibility to contribute to a Roth IRA is
phased out as AGI rises from $99,000 to $114,000 for
single filers, and $156,000 to $166,000 for joint
filers. Married taxpayers who file separately cannot
contribute to a Roth IRA if their income is above
$10,000.
Employer-sponsored 401(k)s
Pre-tax contributions to employer-sponsored
retirement plans reduce your taxable wages. Matching
contributions and income earned within your plan also
are tax-deferred. The employee contribution limit for
2007 is $15,500. Employees age 50 or older by the end of
2007 may make an additional catch-up contribution of
$5,000 for 2007.
» Next:
Child/education
tax breaks
This article was provided by the American Institute of Certified Public Accountants (AICPA).
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