More People Eligible For a Roth IRA in 2007, Advises FindAGoodCPA. com
Roth IRAs provide individuals with the unique opportunity to contribute money into a retirement account that grows tax-free. For the first time since being introduced in 1998, the income limitation for Roth IRAs has been increased, allowing more people to contribute to a Roth IRA in 2007.
Woburn, MA (PRWEB) May 21, 2007
2007 marks the tenth year that Roth IRAs have been in existence. The IRS has announced that for the first time since being introduced back in 1998, the income threshold limiting the number of people eligible for this tax-free investment opportunity has increased. Andrew D. Schwartz CPA, founder of FindAGoodCPA. com (www. FindAGoodCPA. com), comments on Roth IRAs.
What Is A Roth IRA?
IRA stands for Individual Retirement Account. Before the introduction of the Roth IRA, only one type of IRA was available. Money contributed to a traditional IRA may or may not be tax deductible, but always grows tax-deferred. That means individuals will owe income taxes on money withdrawn from these accounts down the road.
"With a Roth IRA, you forego a tax deduction today in exchange for the government's promise of tax-free growth. Assuming the rules don't change between today and when you retire, you won't owe a dime in taxes on distributions taken from your Roth as long as you've owned a Roth IRA for at least 5 years and amounts withdrawn are taken after you reach the age of 59 1/2 or are used for up to $10,000 towards first time home buyer expenses," explains Andrew Schwartz CPA, founder of FindAGoodCPA. com (www. FindAGoodCPA. com), a site where taxpayers can locate a tax professional in their metropolitan area based on the professional's specialty.
Roth IRAs Are Not Available to Everyone
An interesting trend of recent tax law changes is that many of the newer tax breaks aren't available to all taxpayers any more. The Roth IRA is no exception.
Since their introduction ten years ago, taxpayers can only contribute the full amount to a Roth IRA if their Adjusted Gross Income (AGI) did not exceed $95,000 if single or $150,000 if married. No contribution was allowed for single individuals whose AGI surpassed $110,000 and for married couples whose AGI surpassed $160,000.
From 1998 through 2006, this phase-out range has held steady. A pro-rata contribution is allowed for years that a person's AGI falls within the applicable phase-out range.
4 Percent Jump
For the first time in ten years, the income limitation for Roth IRAs has increased. The phase-out range for single individuals as well as for married couples jumps by four percent in 2007.
According to the IRS in Rev. Proc. 2006-53, "for taxable years beginning in 2007, the applicable dollar amount [to begin to phase out a Roth IRA] for married taxpayers filing a joint return is $156,000. The applicable dollar amount for all other taxpayers (except married taxpayers filing separately) is $99,000." The phase-out range continues to be $10,000 for married couples and $15,000 for single individuals.
Increased IRA Contributions
The amount you can contribute is on the rise as well. While the maximum contribution into your IRAs remains at $4,000 for 2007, it is slated to increase by 25% to $5,000 for 2008. Anyone 50 or older by December 31st can sock away an additional $1,000 per year into their IRA.
"And remember, you have until April 15, 2008 to contribute to your Roth or traditional IRA for 2007," says Schwartz. "And thanks to the recent four percent increase in the phase-outs, you have a little better odds of qualifying for a Roth IRA in 2007."
About Andrew D. Schwartz CPA
Andrew D. Schwartz, CPA is the editor and founder of www. FindAGoodCPA. com, a site where taxpayers can interact with CPAs who specialize in a variety of niches such as healthcare, real estate professionals, lawyers, IRS problem resolution, and QuickBooks. Schwartz has provided tax and basic financial planning advice in interviews with various media, including the Washington Post and Wall Street Journal. He is available for interviews.
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