Author Topic: A tax question re: EE Bonds & Roth IRA  (Read 1056 times)

WootWoot

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A tax question re: EE Bonds & Roth IRA
« on: January 31, 2017, 11:47:19 AM »
Several months ago, a family member gave me an EE savings bonds, which I cashed in. The amount of interest on it is something in the area of $17,000. I can't find the thread, but I did ask here what my projected tax on it would be and I have set that money aside.

In the meantime, I just opened a Roth IRA with Vanguard and invested $5K for tax year 2016. Tax question: Is the $5K something I can claim on my tax return, and will it "cross out" the money I will owe for the interest on the bond?

Thanks!

Catbert

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Re: A tax question re: EE Bonds & Roth IRA
« Reply #1 on: January 31, 2017, 11:49:58 AM »
Nope, no immediate tax impact for Roth contribution.  It goes in after tax but grow tax free and comes out tax free.

A traditional IRA is a tax deduction (assuming your income isn't too high) and could *offset* your EE bond earned interest.

WootWoot

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Re: A tax question re: EE Bonds & Roth IRA
« Reply #2 on: January 31, 2017, 12:12:55 PM »
My income is around $35K, married filing jointly. Oh well...Thanks for replying!

etselec

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Re: A tax question re: EE Bonds & Roth IRA
« Reply #3 on: January 31, 2017, 12:53:59 PM »
You may be able to recharacterize your Roth contribution to Traditional, which would let you deduct it on your taxes. Worth looking into, especially if the $ pushes you into a higher tax bracket.

WootWoot

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Re: A tax question re: EE Bonds & Roth IRA
« Reply #4 on: January 31, 2017, 01:49:04 PM »
It won't bump me into a higher tax bracket, thankfully. I'll look into switching, though.