Twelve Tax Tips of Christmas Why you should convert our 401k or Traditional IRA into a ROTH IRA. FOLLOW CHRISTIAN: Instagram: Business: Films: This material has been prepared for informational purposes only, and is not intended to provide, and should not be relied on for, tax, legal or accounting advice. You should consult your own tax, legal and accounting advisors before engaging in any transaction. Links above include affiliate commission or referrals. I'm part of an affiliate network and I receive compensation from partnering websites. The video is accurate as of the posting date but may not be accurate in the future. #taxes #finance #investments...(read more)
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As the end of the year approaches, it's time to start thinking about year-end tax planning. One strategy to consider is the backdoor Roth IRA conversion. This method allows high-income individuals to contribute to a Roth IRA, even if their income exceeds the limits set by the IRS. The Roth IRA is a great retirement savings tool because it allows your money to grow tax-free and withdrawals in retirement are also tax-free. However, the IRS limits the amount of money that high-income individuals can contribute to a Roth IRA. For example, for the 2021 tax year, individuals with a modified adjusted gross income (MAGI) above $140,000 and married couples with a MAGI above $208,000 are not eligible to make a direct contribution to a Roth IRA. To get around these income limitations, high-income individuals can use the backdoor Roth IRA conversion strategy. The strategy involves making a nondeductible contribution to a traditional IRA and then converting that contribution to a Roth IRA. Since the contribution was made with after-tax dollars and the conversion is considered a rollover, there are no taxes due on the conversion. Here's how it works: 1. Make a nondeductible contribution to a traditional IRA. For the 2021 tax year, the contribution limit is $6,000 for individuals under age 50 and $7,000 for those 50 and older. 2. Wait a few days or weeks for the contribution to settle. 3. Convert the traditional IRA to a Roth IRA. Since the contribution was made with after-tax dollars, there are no taxes due on the conversion. It's important to note that if you have other pre-tax IRAs, such as rollover IRAs from previous employers, the backdoor Roth IRA conversion strategy may not be as advantageous because the IRS considers all traditional IRAs when calculating the tax on a conversion. This is known as the pro-rata rule. If you're unsure if the backdoor Roth IRA conversion strategy is right for you, consult with a financial advisor or tax professional. In conclusion, the backdoor Roth IRA conversion is a great way for high-income individuals to take advantage of the benefits of a Roth IRA. As with any tax strategy, it's important to do your research and consult with a professional before making any decisions. https://inflationprotection.org/backdoor-roth-ira-conversion-year-end-tax-tips-2021/?feed_id=80508&_unique_id=641b7fce5a3f0 #Inflation #Retirement #GoldIRA #Wealth #Investing #2021rothconversion #backdoorrothira #MegaBackDoorRothIRA #rothconversion #rothconversionexplained #rothconversioninretirement #rothconversionloophole #rothconversionrules #rothconversionstrategies #rothconversiontaxes #RothIRA #rothiraconversion #rothiraconversion2021 #RothIRAConversionExplained #rothiraconversionstrategy #rothiraexplained #TaxPlanning #taxesonrothconversion #whendoesarothconversionmakesense #BackdoorRothIRA #2021rothconversion #backdoorrothira #MegaBackDoorRothIRA #rothconversion #rothconversionexplained #rothconversioninretirement #rothconversionloophole #rothconversionrules #rothconversionstrategies #rothconversiontaxes #RothIRA #rothiraconversion #rothiraconversion2021 #RothIRAConversionExplained #rothiraconversionstrategy #rothiraexplained #TaxPlanning #taxesonrothconversion #whendoesarothconversionmakesense
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