Does your wife have access to a pension? Most teachers in my area have a pension and pretty much ignore their 403b/457. If not, does she get a match on contributions to those accounts?
You can add $5500 per person to an IRA or Roth (they share the same cap). So that's $11,000 of income.
Yes, the IRS doesn't care if the dollars you put into a retirement account are the physical dollars that you earned from your job for IRA and Roth IRA accounts. However, you are typically limited to putting in only the actual earnings into your wife's account. You could then just live off of your savings though and get the same net effect.
As far as 2014 is concerned, the boat has already past for 403b/457 contributions. You can't add to those accounts after the fact. You can still contribute up to your max ($5500 per person unless you're over 50 yrs old) for 2014 though. Remember that Roth IRA contributions are not eligible for tax deductions today, but you may still qualify for the savers credit if you are eligible.
Can we still use the standard deductions along with the IRA deduction PLUS the Savers credit?!?Yes, if you qualify.
Does your wife have access to a pension? Most teachers in my area have a pension and pretty much ignore their 403b/457. If not, does she get a match on contributions to those accounts?
You can add $5500 per person to an IRA or Roth (they share the same cap). So that's $11,000 of income.
Yes, the IRS doesn't care if the dollars you put into a retirement account are the physical dollars that you earned from your job for IRA and Roth IRA accounts. However, you are typically limited to putting in only the actual earnings into your wife's account. You could then just live off of your savings though and get the same net effect.
As far as 2014 is concerned, the boat has already past for 403b/457 contributions. You can't add to those accounts after the fact. You can still contribute up to your max ($5500 per person unless you're over 50 yrs old) for 2014 though. Remember that Roth IRA contributions are not eligible for tax deductions today, but you may still qualify for the savers credit if you are eligible.
Regarding the tax for IRAs ok I get it. So lets say she makes 50 000 dollars, we can only put 50k in IRA this year... and only 11k will be tax deductible correct?
Roth IRAs are not tax deductible? I thought they'd be deductible in conjunction with the IRA. Or do you mean because they are exempt of taxes at the END of the Roth lifespan, then they are not deductible in the present moment?
So ok in summary ...
457/403b is through your employer. It comes deducted from your paycheck so... there is no retroaction whatsoever.
IRAs both Roth and Traditional are eligible. You say only traditional are deductible although Roth IRA we may be eligible for savers credit?
I looked a bit, and for a married couple filing jointly for under 61000 is a 10% credit.
So this means, because I didnt have income, and she gets less than 61k, if we put everything that we are eligible in IRA's so 11000 dollars, not only those 11k deduct from the AGI putting it at lets say 50000-11000 = 49 000
but also, when calculating the tax due, we get a credit of 1100 dollars?? 10% of 11k?? At least thats my understanding of what a credit is, unlike a deduction, a credit is made after the tax owed is calculated.
We haven't filed yet because I'm still researching... Ive only been in the country a couple months, so I'm still getting used to how all this works and the tax code.I highly recommend you get a copy of TurboTax or TaxAct or Excel1040 or ... (any of the highly used tax software packages). Two reasons:
I have accounts with all three companies. Vanguard is clunky and difficult to deal with for anything out of the ordinary. Index funds and basic ETF's are their specialties. Fidelity has a better website, offices where you can visit your money, and Spartan mutual funds. Fidelity also has a large selection of commission-free ETF's. Schwab has their own brand of ETF's and index funds. Low account minimum and anytime I spot an extra $50 lying around, I can just transfer it over and drop it in. The investor checking with Schwab Bank refunds ATM fees.
What about your wife's 457 plan? Deferred comp is not a qualified retirement plan, so there are no penalties for accessing the money before age 59 1/2. If it's less offensive in fees and investment selections, I would bulk that up. However, it's too late for 2014, so she can only sign up prospectively.
The retirement plans through employers have a cutoff of December 31st of each year (vs April of next year for IRAs). Sounds like you understand that part.
Once again, these Ira limits are not limits on the deductibility but are limits on the contribution.
For your reading pleasure
http://www.irs.gov/publications/p590/
http://www.irs.gov/Retirement-Plans/401%28k%29-Plans
Sent from my iPhone using Tapatalk
RE: IRS Saver's Credit$400. See the case study spreadsheet (http://forum.mrmoneymustache.com/ask-a-mustachian/how-to-write-a-%27case-study%27-topic/msg274228/#msg274228) if you want to evaluate more "what if?" options, but in 2015 for the situation you described above:
The max credit a married couple can get is only $400 if they earn $60K or less (married filing jointly)?
Let's say Jill and John have AGI of $60,000 and contribute $30,000 into their employer sponsored retirement accounts and IRA's?
Would they get 30,000 x .1 = $3000 tax credit? OR 4000 x .1 = $400?
I'm planning on this very scenario above...but think according to the rules I can only count $4000 of our $30,000 contributions?
Category | Monthly | Comments | Annual |
Salary/Wages | $7,500 | $90,000 | |
401(k) / 403(b) / TSP / etc. | $2,500 | Room to increase? | $30,000 |
Federal Adj. Gross Inc. | $5,000 | $60,000 | |
Federal tax | $382 | 2015 rates, MFJ, stand. ded., 2 exempt. | $4,587 |
State/City tax | $250 | Guess, using 5.00% * Fed. AGI | $3,000 |
Soc. Sec. | $465 | Assumes 2 earners paying | $5,580 |
Medicare | $109 | $1,305 | |
Total income taxes | $1,206 | $14,472 |