Helpful Insights on a ROTH IRA

Have you been thinking about opening a Roth IRA?  Here is some basic information you might want to know about a Roth IRA.

A Roth IRA is an IRA that is subject to the same rules that
apply to traditional IRA’s, except:

• You cannot deduct contributions to a Roth IRA on your individual income tax return.
• If you satisfy the requirements, qualified distributions are tax-free.  A qualified distribution is any payments or distributions from your Roth IRA that meet the following requirements:
  • It is made after the 5-year period beginning with the first taxable year for which a contribution was made to a Roth IRA set up for your benefit.
  • It is made on or after the date you reach 59 ½.
  • It is made because you became disabled.
  • It is made to a beneficiary or to your estate after your death.
  • It is being used to pay qualified acquisition
    costs for a first-time homebuyer. 
    Qualified acquisition costs are costs of buying, building or rebuilding the
    main home of a first-time homebuyer.  
    Generally a first-time homebuyer has had no present interest in a main
    home for the 2-year period ending on the date of acquisition of the home which
    the distribution is being used for.
  • It is made to pay for higher education.
• You can continue to make contributions to your Roth IRA after you reach age 70 ½.
• You can leave amounts in your Roth IRA as long as you live.  You are not required to take distributions from your Roth IRA at any age.  The minimum distribution rules do not apply to Roth IRA’s while the owner of the Roth IRA is alive.
• The account must be designated as a Roth IRA when you set it up.

For more information, the following website does a good job
of explaining the advantages and rules of a Roth IRA: 

                                http://www.your-roth-ira.com/2013-roth-ira-rules.html

Please feel free to contact me at 763-786-7899 or email me at sriley@cpafirm.cc with any of your tax questions.

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