The Money Mustache Community
Learning, Sharing, and Teaching => Ask a Mustachian => Topic started by: WootWoot on January 31, 2017, 11:47:19 AM
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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!
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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.
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My income is around $35K, married filing jointly. Oh well...Thanks for replying!
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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.
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It won't bump me into a higher tax bracket, thankfully. I'll look into switching, though.