Individual

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Should you convert a Traditional IRA into a Roth IRA?

 

A simple question, with a complex answer. Let me first outline the basic points of each:

 

With a Traditional IRA, you get a tax deduction for contributions made during the contribution period. The earnings on the account balance grows tax deferred. Both contributions and earnings are taxed when the funds are withdrawn from the account.

 

Gambling Income and Losses

The American Opportunity Tax Credit
 

Many parents and college students will be able to offset the cost of college over the next two years under the new American Opportunity Tax Credit. This tax credit is part of the American Recovery and Reinvestment Act of 2009.


Here are six important facts the IRS wants you to know about the new American Opportunity Tax Credit:

 

Children with investment income may have part or all of this income taxed at their parent’s tax rate rather than at the child’s rate. Investment income includes interest, dividends, capital gains and other unearned income

This rule applies to children who have investment income of more than $1,900 and meet one of three age requirements:

   1. The child is younger than 18.

   2. The child is 18 and has earned income that does not exceed one-half of their own support for the year.

If you paid someone to care for a child, spouse, or dependent, you may be able to reduce your tax by claiming the Child and Dependent Care Credit on your federal income tax return. Below are the top ten things you need to know about claiming a credit for child and dependent care expenses.

 

As an alternative method for donating to a charity, certain taxpayers may transfer funds from their IRA to an eligible charitable organization. Here are ten things taxpayers who are thinking about making such a donation will need to know.

 

1. The IRA owner must be age 70 ½ or older.

 

2. The donor must directly transfer the money tax-free to an eligible organization.

 

3. The maximum amount that an IRA owner may transfer annually tax-free is $100,000 to an eligible organization.

 

Cash and Checks

 

• Cash contributions, regardless of amount, must be substantiated with a receipt from the charitable organization in order for the contribution to be deductible, effective January 1, 2007.

 

Deducting Charitable Contributions

Here are a few tips to ensure your contributions pay off on your tax return:

 

1. Contributions must be made to qualified organizations to be deductible. You cannot deduct contributions made to specific individuals, political organizations and candidates.

 

2. You cannot deduct the value of your time or services. Nor can you deduct the cost of raffles, bingo or other games of chance.