Traditional IRA
Who is eligible for a Traditional IRA?
Almost everyone with earned income may participate.
When will a member pays taxes on their Roth IRA?
Members pay taxes at contribution, and can withdrawal tax-free.
** A member may need to pay taxes at the time of withdrawal if its an early distribution. **
What does SEP stand for?
Simplified Employee Pension.
What does ESA stand for?
Educational Savings Account.
What is a 529 plan?
A 529 allows families to invest and grow savings specifically for educational/college expeses.
When does the member pay taxes on their Traditional IRA?
A Traditional IRA grows tax deferred until withdrawn.
What is the maximum age for members to be able to make contributions?
None! However, they must have earned income.
** This is true for ALL (Trad, Roth, SEP) IRAs. **
Who is eligible for a SEP IRA?
Almost everyone who has self-employed earned income.
An employer who has elected to est. a SEP as the pension plan for an employee.
What is the maximum contribution limit for an ESA?
The max limit for EACH child is $2000 per year.
True or False. All states offer a 529 plan.
False.
What are the annual contribution limits for 2020 and 2021?
2020/2021: Under 50 - $6,000
Over 50 - $7,000
This is true for both Traditional and Roth IRAs.
What are some examples of earned income?
Earned income includes:
Wages, Salary, Tips, Self Employed income, Alimony, Other amounts that appear in Box 1 on a W2
When will the member need to pay taxes on their SEP?
Contributions are made tax-free, the member would need to pay at time of withdrawal.
What can funds from an ESA be used for tax free?
Examples of expenses are: Tuition, fees, books, room and board, educational computer expenses, academic tutoring, special needs services, uniforms, and transportation.
ESAs are the only educational savings that will allow you to use funds for qualified K-12 expenses.
What are some examples of withdrawals that are considered "college expenses"?
College expenses include: Tuition, books, room and board, educational computer technology.
What age is a member eligible to withdrawal from an IRA without IRS penalties?
Members can withdrawal from an IRA starting at 59 1/2 without penalty.
What are some examples of exceptions that members can withdrawal from a ROTH IRA early without penalty?
Penalty-free/tax-free withdrawals prior to 59 1/2 are only allowed for the following:
Disability, death, or first-time home purchases (10K lifetime limit).
** The funds do need to be in the account for AT LEAST 5 years **
What are some examples of exceptions that members can withdrawal from a SEP IRA early without penalty?
Some exceptions are made for:
Unreimbursed medical expenses, medical insur. premiums while unemployed, disability or death, first-time home purchase (10k lifetime limit), qualified reservists, or college expenses.
What type of products are offered with an ESA?
ESA Savings, ESA MMSA, ESA Certificates (3months-7yr terms).
What are the tax benefits of a 529 plan?
The earnings are tax-deferred, and withdrawals for qualified educational expenses aren't subject to federal taxes.
What are some examples of exceptions that members can withdrawal from a Traditional IRA early without penalty?
Some exceptions are made for:
Unreimbursed medical expenses, disability or death, first-time home purchases (10K lifetime limit), IRS Levy, Qualified Reservists, or College Expenses.
Who is eligible for a ROTH IRA?
Individuals earning: 2020 - $139k or less
2021 - $ 140k or less
Married couple earning: 2020 - $206k or less
2021 - $208k or less
What is the maximum annual contribution for a SEP?
2020 - $57,000 or 25% of self-employment income, whichever is less.
2021 - $58,000 or 25% of self-employment income, whichever is less.
What are the tax benefits of an ESA?
Funds in an ESA grow tax-free, and withdrawals are tax-free when used for qualified educational expenses before the beneficiary (child) turns 30.
What are the contribution limits for a 529 plan?
Contribution limits are dependent upon the state that operates the 529 plan. Maximum limits range from $235K-$500K.
**Virginia taxpayers may deduct contributions up to $4,000 per account per year with an unlimited carryforward to future tax years, subject to certain restrictions. **