This week, Gail has some tips on how to get your own copy of the 2001 Tax Act, and answers some Roth IRA-related questions.
Is there a copy of the tax bill on the internet for public viewing?
God Bless, Terence
You bet there is, although I gave up trying to find it at the IRS Web site. Technically, it is called the "Economic Growth and Tax Relief Reconciliation Act of 2001." So if you're using a search engine to find it, try using the complete title.
Or, you can simply go directly to www.house.gov/rules/1836cr.pdf, where you'll find the complete text in its final form. You can peruse and/or print the entire Act or just the portions of interest to you. However, one problem you will encounter is that the Act constantly refers back to previously existing tax laws and instructs that new language be inserted or old parts deleted.
So unless you've got your own personal copy of the Internal Revenue Code, this can make for slow going. While it's great to read the actual text, it can "take a village" — of lawyers! — to actually figure out what Congress means. So if you're looking for information on a particular aspect of this Act, try searching the Internet using key words such as "estate tax" or "Education IRA." This will connect you to sites written by people who have actually had time to digest and interpret the new law.
On the other hand, if what you're really after is some new reading material to conquer insomnia, download the whole Act! Be sure to let me know if you uncover anything really juicy. :>
My wife and I are both employed. Our joint gross income is $104,000. Under the new tax legislation, how much can we contribute to Roth IRAs?
The rules for Roth IRA contributions are pretty straightforward: whether you have a retirement plan at work or not, if you are married and file a joint tax return, each spouse is eligible to contribute $2,000 to a Roth Individual Retirement Account, provided something called your "modified adjusted gross income" (MAGI) is less than $150,000.
If your MAGI is greater than $150,000, but less than $160,000, you can contribute a portion of the $2,000. Once your MAGI exceeds $160,000, you can no longer contribute to a Roth. These limits were not affected by the 2001 Tax Act.
You can get complete details on how to compute your modified adjusted gross income in IRS Publication 590, which you can download from the IRS Web site: http://www.irs.gov.
The process involves finding the line on your tax return for Adjusted Gross Income and adding back some deductions such as student loan interest expense and employer-paid adoption expenses. If you're close to the income limits , consider having a tax professional do the math for you.
If you are single, you must have MAGI under $95,000 to contribute the full amount to a Roth IRA. At $110,000, you are no longer eligible.
As regular readers of this column know, I am a big fan of Roths. I encourage you and your wife to max out your contributions for this year. You have until April 15, 2002 to do so.
As you probably heard, maximum annual IRA contributions jump to $3,000 beginning with your 2002 contributions. There's also an additional $500 "catch-up" provision for those over age 50. This applies to both the traditional (tax-deductible) IRA as well as the Roth (after-tax) variety.
Go for it!
P.S. If you are married, but file separately, neither spouse can contribute to a Roth IRA.
I am 76 years old, I have a part-time job. Can I open an IRA? I do not have one now.
Although you cannot contribute to a traditional, tax-deductible IRA after age 70 1/2, there is no age limit on Roth IRA contributions. While these are not tax-deductible, they offer the benefit of tax-free growth.
There's no federal income tax on withdrawals.
Provided you meet the income limitations described in the previous answer, you are eligible to contribute 100% of your earned income up to a maximum of $2,000 to a Roth IRA this year. Next year, because you are over age 59 1/2, the dollar limit will be $3,500.
I congratulate you on staying active!
All the best,
If you have a question for Gail Buckner and the Your $ Matters column, send them to firstname.lastname@example.org along with your name and phone number.
The views expressed in this article are those of Ms. Buckner or the individual commentator, and do not necessarily reflect the views of Putnam Investments Inc. or any of its affiliates. You should consult your own financial adviser for advice regarding your particular financial circumstances. This article is for information only and is not an offer of the sale of any mutual fund or other investment.