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The Taxpayer Relief Act of 1997
The Taxpayer
Relief Act of 1997, known by accountants as the 1997's Accountants'
Relief Act. GOD BLESS CONGRESS!!!!
President
Clinton promised middle-class tax relief, but the administrations
own study shows half the benefits flowing to the nation's 20 percent
richest earners.
Are Americans
saving enough toward retirement and other longer-term financial
goals? Many observers believe not. Lawmakers included several
measures in 1997's tax legislation designed to boost the national
savings rate.
IRAs under
pre-1997 Act Law, allowed you and your spouse each contribute
up to $2,000.00 each year to your own IRA and you must began to
receive minimum annual distributions from your IRA no later than
age 70½.
New choices
for your IRA beginning in 1998:
In 1998,
you can invest in a new type of IRA called the "Roth IRA." You
can't deduct your contribution to a Roth IRA, but if you meet
certain requirements, withdrawals from a Roth IRA will be entirely
tax-free. You can contribute up to $2,000.00 of your earnings
in a year to a Roth IRA, less any contributions you make to a
regular IRA for that year. Unlike regular IRAs, you can continue
making contributions after reaching age 70 ½ as long as your combined
income is greater than your combined Roth IRA contribution. No
Roth IRA contribution is allowed if you are married and file separately.
If your AGI
for a year exceeds $160.000.00 for a married couple and $110,000.00
for a single person, you can't contribute to a Roth IRA. There
is a phase out for the Roth IRA if your AGI is between $150,000.00
and $160,000.00 for a married couple and between $95,000.00 and
$110,000.00 for a single person. You can even contribute to a
Roth IRA whether or not you are an active participant in your
employer's plan; you can make a $2,000.00 contribution as long
as you are under the AGI phase out limits. However, in no case
can contributions to all an individual's IRAs for a tax year exceed
$2,000.00.
Unlike regular
IRAs, there is no requirement that you must begin to take distributions
from your Roth Ira AT AGE 70 ½. A qualified distribution from
a Roth IRA is not taxable if it is: (1). Not made within the five-tax-year
period starting with the year of the contribution, (2). Made at
or after age 59½, or in the event of death or disability,
or for first-time homebuyers expenses and (3). Withdrawal of funds
to pay higher education expenses. Qualified higher education expenses
include tuition at a post-secondary education institution, as
well as room and board, fees, books, supplies, and equipment required
for enrollment or attendance. Expenses for graduate level courses
are also covered. Covered under this is the taxpayer, spouse,
or any child or grandchild of the taxpayer or his spouse. The
taxpayer's child (or grandchild) need not be a dependent.
Be sure to
consult with a tax advisor for proper planning and implementation
of tax savings ideas to be sure they are right for you.
C.
David Pitzer, CPA, PC
118
Two Mile Pike
Goodlettsville, TN 37072
(615) 851-2727
Fax: (615) 851-8711
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