Are you wondering about that new Pension Act?
It’s likely that you aren’t. After all, that Act just tells big corporations, who might not have the money to pay their employees’ future pensions, to get their act together.
And if your future retirement isn’t depending on such a company, then what impact would those hundreds of pages have on you, the average taxpayer?
The bill covers more than just “under funding” of pension plans. It impacts you in quite a few ways!
Here are the good ways:
• The amounts that you can contribute to your retirement funds such as IRAs and 401-Ks, will continue to increase – inflation adjusted.
• When you reach the age of 50 (ugh!), those additional contributions (catch-ups) to those plans will still be available.
• If you are putting money for your children’s education into a “529 plan” – those plans are now permanent. (I bet you didn’t know that those plans might have disappeared in the future!)
• If you are a beneficiary of an IRA, you can now roll that IRA into your own IRA, without paying tax. (Previously, only a beneficiary spouse could rollover the deceased’s IRA. Everyone else had to pay tax.)
• If you received a tax credit based on your IRA contributions, that credit will still be available in future years. (Yeah!)
• In 2007, you can have your tax refund directly deposited into your IRA account.
And here are the not so good ways, both related to giving to charities:
• Currently, only if you gave $250 or more cash to charity, did you need a receipt in order to deduct it on your tax return. Starting in 2007, to deduct any cash contribution, you must have a bank record or written receipt from the charity, even if it is only that $1 or $5 that you dropped into the bell ringer’s bucket or placed on the church plate.
• After August 17, 2006, when you donate clothing and/or household goods to a charity and plan to take a tax deduction, the items must be in good used condition or better. Also, if you deduct a contribution item of “minimal value”, the IRS can deny the deduction. So if you had planned to give all of your junk (including socks with holes) to Goodwill, you missed the date.
Over the next couple of weeks, I plan to write more blogs about this tax act- explaining those good and bad ways in more detail. And what is happening with the sales tax deduction. So look for my blogs!