Tax Incentive to Use a Roth in Retirement — Business Management Daily: Free Reports on Human Resources, Employment Law, Office Management, Office Communication, Office Technology and Small Business Tax Business Management Daily

Tax Incentive to Use a Roth in Retirement

Get PDF file

by on
in Small Business Tax

Q. Your article on Social Security benefits (RR, 6/26/06) raised some interesting points. I am 72 years old. From time to time, I take a small distribution from my Roth IRA. Does this count as provisional income for the tax on benefits? F.R.G., Wilmington, Del.

A. No. As stated in the article, benefits are subject to tax if your provisional income (PI) exceeds certain income thresholds. PI is the total of your adjusted gross income (AGI), tax-exempt interest income and one-half of Social Security benefits received. Although Roth IRA distributions may be tax-free, they are not treated as tax-exempt interest income. This provides another tax advantage for Roth IRAs over traditional IRAs. Tip: As opposed to traditional IRAs, lifetime distributions from a Roth aren’t mandatory, either.

Related Articles...

Leave a Comment


Previous post:

Next post: