We hope this finds you and your family well and that 2023 has had a great start for you. For many of us, the arrival of a new year has its traditions: making resolutions, taking down holiday décor, returning to routines, and getting paperwork together for your income tax return.
Note: Recent legislation has changed RMD rules, which govern at what age a person must begin withdrawing from retirement accounts.
Q. Am I eligible for a Roth conversion? Can you estimate my tax liability if I converted my traditional individual retirement account (IRA) to a Roth IRA?
Note: Some people consider converting their traditional IRA to a Roth IRA. It’s important to understand the pros and cons of a conversion, if a conversion is a strategy to consider, and if you are eligible to do so.
Roth IRA distributions must meet a 5-year holding requirement and occur after the age of 59½ to qualify for the tax-free and penalty-free withdrawal of earnings. Tax-free and penalty-free withdrawals can also be taken under certain other circumstances, such as the owner’s death. The original Roth IRA owner is not required to take minimum annual withdrawals.
Q. I've heard the phrase "Superfunding a 529 Plan?" Is this a strategy that my family should consider?
A 529 plan is a college savings plan that allows individuals to save for college on a tax-advantaged basis. The state tax treatment for 529 plans is only one factor to consider before committing to a savings plan. Also, consider the fees and expenses associated with the particular plan. Whether a state tax deduction is available will depend on your residence. State tax laws and treatment may vary. State tax laws may be different from federal tax laws. Earnings on non-qualified distributions will be subject to income tax and a 10% federal penalty tax.
Q. I'm considering buying an electric car in 2023. Would I be eligible for any tax credits?
Please let us know if you would like more information. Our office may have some additional tax resources that may be helpful.
Questions to Ask Your Tax Accountant This Tax Season
February 24, 2023