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Posted: 3/1/2015 4:38:16 PM EDT
[#1]
How did you put $7,500 in a Roth IRA when the limit is $5,500?
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Posted: 3/1/2015 4:39:26 PM EDT
[#2]
The 25% tax is only charged on the amount you made over the cutoff, not your entire salary. There isn't going to be much difference between being at the top of one bracket or the bottom of the next one
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Posted: 3/1/2015 4:45:27 PM EDT
[#3]
Quote HistoryQuoted:
The 25% tax is only charged on the amount you made over the cutoff, not your entire salary. There isn't going to be much difference between being at the top of one bracket or the bottom of the next one There is a big difference in the "base" tax. For 2014 the 10% bracket is $1,815 plus 15% over $18,150 and 25% bracket is $10,162 plus 25% over $73,00. |
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Posted: 3/1/2015 4:46:16 PM EDT
[#4]
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How did you put $7,500 in a Roth IRA when the limit is $5,500? Beats me. This is a 401k Roth, does that make a difference? |
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Posted: 3/1/2015 4:54:02 PM EDT
[#5]
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There is a big difference in the "base" tax. For 2014 the 10% bracket is $1,815 plus 15% over $18,150 and 25% bracket is $10,162 plus 25% over $73,00. Quote HistoryQuoted:
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The 25% tax is only charged on the amount you made over the cutoff, not your entire salary. There isn't going to be much difference between being at the top of one bracket or the bottom of the next one There is a big difference in the "base" tax. For 2014 the 10% bracket is $1,815 plus 15% over $18,150 and 25% bracket is $10,162 plus 25% over $73,00. ? The math works out to where you only pay 25% on anything over $73,000 (married filing jointly) Tax chart: http://www.forbes.com/sites/kellyphillipserb/2013/10/31/irs-announces-2014-tax-brackets-standard-deduction-amounts-and-more/ |
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Posted: 3/1/2015 4:59:09 PM EDT
[#6]
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? The math works out to where you only pay 25% on anything over $73,000 Quote HistoryQuoted:
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The 25% tax is only charged on the amount you made over the cutoff, not your entire salary. There isn't going to be much difference between being at the top of one bracket or the bottom of the next one There is a big difference in the "base" tax. For 2014 the 10% bracket is $1,815 plus 15% over $18,150 and 25% bracket is $10,162 plus 25% over $73,00. ? The math works out to where you only pay 25% on anything over $73,000 ok, but my taxes went up $5k for 2013 and '14 over '11 and '12 with just a little more earning. The only difference is the tax bracket. Does that make sense? My net bring home for 2014 was $3k less than '12 and my gross was $6k higher. There is some wonderful medical benefit changes in there too though. Thanks Obama. FBO! |
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Posted: 3/1/2015 5:08:55 PM EDT
[#7]
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ok, but my taxes went up $5k for 2013 and '14 over '11 and '12 with just a little more earning. The only difference is the tax bracket. Does that make sense? My net bring home for 2014 was $3k less than '12 and my gross was $6k higher. There is some wonderful medical benefit changes in there too though. Thanks Obama. FBO! Quote HistoryQuoted:
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The 25% tax is only charged on the amount you made over the cutoff, not your entire salary. There isn't going to be much difference between being at the top of one bracket or the bottom of the next one There is a big difference in the "base" tax. For 2014 the 10% bracket is $1,815 plus 15% over $18,150 and 25% bracket is $10,162 plus 25% over $73,00. ? The math works out to where you only pay 25% on anything over $73,000 ok, but my taxes went up $5k for 2013 and '14 over '11 and '12 with just a little more earning. The only difference is the tax bracket. Does that make sense? My net bring home for 2014 was $3k less than '12 and my gross was $6k higher. There is some wonderful medical benefit changes in there too though. Thanks Obama. FBO! You really need to look at the actual deductions and not just assume that any difference is federal tax. There are many other things that have changed recently |
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Posted: 3/1/2015 5:39:58 PM EDT
[#8]
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You really need to look at the actual deductions and not just assume that any difference is federal tax. There are many other things that have changed recently Quote HistoryQuoted:
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The 25% tax is only charged on the amount you made over the cutoff, not your entire salary. There isn't going to be much difference between being at the top of one bracket or the bottom of the next one There is a big difference in the "base" tax. For 2014 the 10% bracket is $1,815 plus 15% over $18,150 and 25% bracket is $10,162 plus 25% over $73,00. ? The math works out to where you only pay 25% on anything over $73,000 ok, but my taxes went up $5k for 2013 and '14 over '11 and '12 with just a little more earning. The only difference is the tax bracket. Does that make sense? My net bring home for 2014 was $3k less than '12 and my gross was $6k higher. There is some wonderful medical benefit changes in there too though. Thanks Obama. FBO! You really need to look at the actual deductions and not just assume that any difference is federal tax. There are many other things that have changed recently I think it is time to ditch Turbo Tax and go to a pro. |
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Posted: 3/1/2015 6:41:19 PM EDT
[#9]
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Beats me. This is a 401k Roth, does that make a difference? Quote HistoryQuoted:
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How did you put $7,500 in a Roth IRA when the limit is $5,500? Beats me. This is a 401k Roth, does that make a difference? Oh sorry, yeah the limit is higher for 401k roth. |
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Posted: 3/2/2015 3:17:16 PM EDT
[#10]
I'm hosed. According to my 401k provider, they cannot change Roth back to pre-tax after the money has been contributed.
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Posted: 3/2/2015 4:24:38 PM EDT
[#11]
Honestly find a good CPA. I pay 350 and they have saved me tons of money compared to me doing it myself (from mistakes)
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Posted: 3/2/2015 4:47:52 PM EDT
[#12]
If you went $7k in to the 25% bracket you paid $1,750 in taxes that could have been avoided by diverting that to a Traditional 401k. It's really that simple.
If your tax due amount comes out to $5,000 more than the prior year but your Adjusted Gross Income (bottom of Pg.1 and top of Pg. 2 on Form 1040) didn't change much, then you screwed something up. Check the rest of your form, compare it closely to the prior year. Did you claim your personal exemption? How about your deductions? Did you have the standard deduction in both years? Itemized one year and standard in the other? Did you miss the standard deduction all together? Something doesn't sound right. on edit: No, you can't go back on 401k contributions and change them at this point. If you want to drop your taxable income some and you haven't made any IRA contributions you can make a Traditional IRA contribution of $5,500 to drop your income by that amount, it would reduce your tax bill by $1,375.00 |
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Posted: 3/2/2015 5:16:13 PM EDT
[#13]
Quoted:
....... I had put $7,500 into the Roth. Had that been in the pre-tax, I would have stayed in the lower tax bracket. ........... Am I screwed or will I be able to get all or some of this $10k back? You'll get all or some of it "back" during retirement..... One thing you're forgetting is that by paying taxes on it now, you don't pay taxes on it when you withdraw the money during retirement. You say you're in the 25% bracket now, but if you had put it into a standard 401K, then retired and withdrew it in the 25% bracket, you'd be paying the same taxes anyways. You're just paying it during retirement instead of now. You're going to pay taxes on it either way. The only difference is when you pay them, and what the tax rate will be. Since you don't know what tax rates will be when you retire, it's really just an educated guess either way, which is why splitting your investments between traditional/roth accounts usually makes sense for most people. By shifting all of your contributions to traditional retirement accounts, you are saving yourself some taxes now, but are you going to be kicking yourself when you're 70 and you're withdrawing money that's taxed at 35% because that's the bracket you end up in? What kind of income do you expect to have during retirement and what do you think tax rates will look like then? Are you better off taking your lumps now? |
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Posted: 3/3/2015 12:13:51 PM EDT
[#14]
Quote HistoryQuoted: You'll get all or some of it "back" during retirement..... One thing you're forgetting is that by paying taxes on it now, you don't pay taxes on it when you withdraw the money during retirement. You say you're in the 25% bracket now, but if you had put it into a standard 401K, then retired and withdrew it in the 25% bracket, you'd be paying the same taxes anyways. You're just paying it during retirement instead of now. You're going to pay taxes on it either way. The only difference is when you pay them, and what the tax rate will be. Since you don't know what tax rates will be when you retire, it's really just an educated guess either way, which is why splitting your investments between traditional/roth accounts usually makes sense for most people. By shifting all of your contributions to traditional retirement accounts, you are saving yourself some taxes now, but are you going to be kicking yourself when you're 70 and you're withdrawing money that's taxed at 35% because that's the bracket you end up in? What kind of income do you expect to have during retirement and what do you think tax rates will look like then? Are you better off taking your lumps now? Quote HistoryQuoted: Quoted: ....... I had put $7,500 into the Roth. Had that been in the pre-tax, I would have stayed in the lower tax bracket. ........... Am I screwed or will I be able to get all or some of this $10k back? You'll get all or some of it "back" during retirement..... One thing you're forgetting is that by paying taxes on it now, you don't pay taxes on it when you withdraw the money during retirement. You say you're in the 25% bracket now, but if you had put it into a standard 401K, then retired and withdrew it in the 25% bracket, you'd be paying the same taxes anyways. You're just paying it during retirement instead of now. You're going to pay taxes on it either way. The only difference is when you pay them, and what the tax rate will be. Since you don't know what tax rates will be when you retire, it's really just an educated guess either way, which is why splitting your investments between traditional/roth accounts usually makes sense for most people. By shifting all of your contributions to traditional retirement accounts, you are saving yourself some taxes now, but are you going to be kicking yourself when you're 70 and you're withdrawing money that's taxed at 35% because that's the bracket you end up in? What kind of income do you expect to have during retirement and what do you think tax rates will look like then? Are you better off taking your lumps now? ETA: your fooked on converting the Roth back to a traditional, it ain't happening |
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Posted: 3/4/2015 1:38:37 AM EDT
[#15]
You want to take money you already paid tax on once but never again in the future to get a tax deferment today and pay taxes later because you bumped up into the next bracket by $7500?
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Posted: 3/4/2015 8:28:58 AM EDT
[#16]
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You want to take money you already paid tax on once but never again in the future to get a tax deferment today and pay taxes later because you bumped up into the next bracket by $7500? Not really. I found out I can't change my past 401k contributions. But I did change them going forward, I am all pre-tax now. Before you berate me, keep reading. I was contributing to my pre-tax IRA also, but I can't deduct it because I make too much money, so I changed my IRA contributions to Roth. So, I just changed which accounts and contributions where pre-tax and which ones where Roth. I am sending my taxes to an accountant today for him to review. |
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Posted: 3/4/2015 10:33:37 AM EDT
[#17]
if you are phased out of being able to deduct Traditional IRA contributions then you are probably ineligible to contribute to a Roth (directly).
You most likely need to do a "Back Door Roth Conversion". You would also be advised to immediately move all non-deductible contributions in your Traditional to a Roth account (you'll pay tax on their earnings now), this will allow them to grow in the Roth account with the earnings being tax free. You really need to go on over to Bogleheads.org and discuss this, your situation is more complicated than you currently understand but it isn't too bad to untangle if you get good advice now (as opposed to waiting). |
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Posted: 3/10/2015 4:14:09 PM EDT
[#18]
IMO - continue to max out your ROTH contribution regardless. You can safely bet that taxes will be higher in 30 years than they are now. Take the tax lumps now while you are young and ABLE to do so.
CMOS |
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