fi nancialforum Tax Prep M
Most people aren’t thinking about taxes in November, but maybe they should be. Here are a few things to consid- er between now and the end of the year: Convert a traditional IRA to a Roth IRA.
Second-Home
Exception Second homes don’t qualify for the home-sale exclusion. All gains count as investment income, and the 3.8-percent Medicare surtax going into eff ect in 2013 can hit the entire gain.
The next two months present the fi nal chance to convert a traditional IRA to a Roth IRA without bumping up against earnings limits. Because Roth IRAs are funded with after-tax dollars, upon con- version from a traditional IRA, taxes are due on amounts that previously were ex- empt from taxation. Fund a Roth IRA. Although earnings limits to convert a conventional IRA to a Roth IRA were lifted for 2010 and 2011, earnings limits still apply to fund a 2011 Roth IRA. On a joint return, the allow- able contribution of $5,000 if under age 50 ($6,000 if age 50 or older) begins to phase out at $159,000 of modifi ed ad- justed gross income and is unavailable to a couple that earns $169,000 or more. For a single fi ler, the lower limit for the maxi- mum Roth contribution is $107,000 and the upper limit is $122,000. Age doesn’t limit funding a Roth IRA,
however, you must have earned income to contribute to an IRA. Contributions to a 2011 IRA may be made until April 15, 2012. If you’re over the earnings limit, here
are a few things to consider that could re- duce your income in the current year: Increase contributions to your 401(k)
or 403(b). Every single fi ler and each employed member of a couple may con-
With tax season only a few months away, here are a few fi nancial moves to consider before the end of the year. By Capt. Bud Schneeweis, USCG-Ret., CFP
tribute up to $16,500 ($22,000 if age 50 or older) to a work-sponsored retirement plan. If you boost your contributions suf- fi ciently, you might get your combined incomes below the Roth limit. Take your capital losses. Up to $3,000 in losses can be applied fi rst against capital gains and then against ordinary income. Contribute to a charity. If you’re over
age 701/2 you can transfer up to $100,000 directly from your IRA to a charity and avoid the required minimum distribution. Sell the homestead. This decision can
wait until after the holidays. However, if you think you might realize future sub- stantial capital gains from the sale of a home, 2012 might be a good year to put it on the market.
A couple needs to report only capital
gains from the sale of their primary resi- dence that exceed the $500,000 home- sale exclusion ($250,000 for single fi lers). However, beginning in 2013, a 3.8-percent Medicare surtax will be imposed on in- vestment income over $250,000 for cou- ples and $200,000 for singles. Any capital gains in excess of the home-sale exclusion are considered investment income and could push you into an income situation where the levy could apply.
MO
— Capt. Bud Schneeweis, USGC-Ret., CFP®, Certifi ed Senior Advisor®, is director, Benefi ts In- formation and Financial Education. To speak with a fi nancial planner, contact USAA at (877) 913-6622 or
www.usaa.com/moaa, or visit www
.moaa.org/fi nancialcenter for other resources.
*online: For additional tax tips and information, visit
www.moaa.org/taxguide. 46 MILITARY OFFICER NOVEMBER 2011
PHOTO: SEAN SHANAHAN
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