A little-noticed tax break in the new “fiscal cliff” tax law—the American Taxpayer Relief Act of 2012 (ATRA)—could provide a big boost for upper-income retirement-savers. It makes it easier to take advantage of a Roth 401(k)—the 401(k) version of the Roth IRA—when an employer provides this option.
Strategy: Switch money from your regular 401(k) account into the Roth 401(k) account. Assuming you meet all the tax law requirements, the distributions you receive in retirement will be completely exempt from federal income tax.
This doesn’t have to be an all-or-nothing proposition. For instance, you can keep some of the funds in a regular 401(k) account. Alternatively, you might move all the funds to a Roth 401(k) account over several years, thereby reducing the overall tax bite.
Here’s the whole story: As with a regular 401(k) plan, contributions to a Roth 401(k) account grow on a tax-deferred basis. However, unlike a regular...(register to read more)
- The Florida tests: Are workers employees or independent contractors?
- Year-end '08 personal tax strategy: Seek estimated-tax safe harbor
- Contractor or employee? New IRS audits turn up heat on worker misclassification
- Call in 'sick' for Sandy victims
- Lessons from the Tax Court: Build up mortgage interest deductions