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What will happen to the tax rate once the Bush tax cuts expire?

August 24, 2012

Regardless of your political opinions, Congress agreeing to keep taxes low while we are experiencing the highest deficit in our nation’s history may be unsustainable. As the House and Senate pass versions of bills that neither will sustain, the taxpayer is left more confused than ever.

If you have already put funds into a traditional IRA account, the government may have given you a tax write-off on your contributions and let you defer the tax on any earnings. Now, the government may be changing the tax rate you have to pay when you withdraw the money in the future. In addition to this, when you turn 70 1/2, the government does require you to take at least the required minimum distribution (RMD) from your IRA each year to force you to pay that tax.

You can think of your IRA as if it has a mortgage on it and next year the government may be raising the rate you have to pay. However, converting to a Roth IRA is like paying off the mortgage on your IRA early, and at these lower rates.

Nearly everyone is a candidate for a Roth conversion this year. However, executing a Roth conversion requires professional assistance. Contact our Florida IRA administrators at NuView IRA today to learn how to convert your IRA. Call 407-367-3472 today!