Hi all...i was hoping maybe someone relatively qualified could assist me with this. I think I'm ready to file my taxes for this year and have a couple questions before I do so...
1. I have a student loan out...I hear that the annual interest paid on the loan can be deducted from your taxes. Is that correct? If so, can it be done more than 1 year? (meaning if I have the loan out for 5 years, can I deduct the interest paid every year of those 5 years?)
2. I have a Roth IRA and am curious whether that has to be counted into my tax filing in anyway? I don't believe so, but I'm not positive.
Thanks much,
CT
2007-01-26 02:01:59 · 5 answers · asked by Anonymous in Business & Finance ➔ Taxes ➔ United States
Student Loan interest is an adjustment to income taken on page 1 of form 1040. The are income limits to determine if it is deductible. If your income exceeds 50,000 per year you will lose the deduction. The amount of interest deductible in any one year is up to 2,500. See Instructions to form 1040 or Internal Revenue Code Section 221.
Roth IRA's are not counted in your tax return. There is no deduction for making the contribution, unlike in a "Traditional IRA" where you do get a tax deduction. The benefits of a Roth are many, but you need to consider your age, income level, and projected rate of return to see if they make more sense than a traditional.
Roth IRA's need to be in place for 5 years (From memory) before the withdrawals are tax free. The account grows without having to pay taxes and all of the withdrawals would then be tax free. The really nice part about them is that they are not subject to required minimum withdrawals. They are also not subject to Income in respect to a decedent. (IRD). This is a complicated point and you'll be dead, your beneficiaries will have to worry about this, so you don't have to. Ask your lawyer about it when drawing your will up!
2007-01-26 02:32:11 · answer #1 · answered by smh60437 3 · 2⤊ 0⤋
Roth IRA = investment savings account in which you pay the taxes now IRA (traditional IRA) = investment savings account in which you pay the taxes later My guess is you would be better off paying taxes later, like when you retire as your income will be low (similar to now though - but I am betting you can use every penny now and also take advantage of compunding) My advice, go with a traditional IRA. However, Roth IRA's provide (allow) for different things than traditionals, such as not having to pay taxes if your investment will be for a first home purchase (among other things). read up on both.. wiki has some good info
2016-05-24 01:45:58 · answer #2 · answered by ? 4 · 0⤊ 0⤋
1) Yes, you can deduct the interest until the loan is paid off.
2) The Roth IRA is not deductable but you may qualify for the Retirement Savings Credit if your income is low enough. Also, students do not qualify for this credit.
2007-01-26 02:09:37 · answer #3 · answered by Wayne Z 7 · 2⤊ 1⤋
i suggest going to this site and filling out the form. it'll help you lower your student loans significantly!
2007-01-26 05:24:27 · answer #4 · answered by TINY C 1 · 0⤊ 1⤋
1.)Yes
2.)No
2007-01-26 02:11:03 · answer #5 · answered by Wurm™ 6 · 0⤊ 1⤋