| Roth's married filing jointly penalty |
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whirlwind
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| Roth's married filing jointly penalty |
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My wife and I each max out a Roth. I contribute 85% of my 401k max and she contributes @40% of her max. We have been contributing for about 4 years and we both make about the same income now. Since it is a requirement to file married jointly when contributing to a roth, we have lost $1300 to the federal government for taxes. If we were allowed to file married seperatly we would not have lost this. Should we continue to contribute to the Roth? To me we need to stop contributing to the Roth because we would not get the money back at retirement and she adamant the we diversify into other places besides our 401Ks. I have looked and researched this and could not find any comments on this type of issue and I am sure others are in the same boat.
Thanks.
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Thu Mar 15, 2007 1:59 pm |
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oldguy
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Location: arizona
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quote:
Since it is a requirement to file married jointly when contributing to a roth, we have lost $1300 to the federal government for taxes. If we were allowed to file married seperatly we would not have lost this.
How did you lose the $1300? The Roth contributions don't affect your income tax. Are you talking about what would have happened if you had contributed elsewhere instead of to the Roths?
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Thu Mar 15, 2007 3:17 pm |
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whirlwind
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The last 2 years we ran our taxes as married file jointly and married filing seperatley. Both years we had a larger refund by filing married seperatly but had to file married jointly do the Roth rule. The first year a CPA completed the taxees, last year('06) I did them.
By no means am I tax expert, but it seems that since our income is about the same in the last 2 years, it seems to come out that filing seperatly is better. Now, she is in sales and was able to deduct milage and other items during these 2 years but now the company gives her a car for buisness use. We have no kids to deduct, but one is on the way which we can claim in '07.
We have enough deductions to itemize.
I might be missing something. If the government has nothing to gain, why do they have the rule that you must file jointly? To me it's a slick move to get some capital gains that they would be loosing from the 401k contributions. This is all my naive specualtion that the tax man is to out to take as much as possible.
I did read one of the post about the growth comparison between a Roth and 401K and essientially they were the same at the end of the day for the $ amount So, the Roth is another incentive to help people to save.
This might get to in depth for an online forum, because I thought the answer would be simpler. Such as the "marriage tax"
Any insight would be greatly appreciated
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Thu Mar 15, 2007 4:31 pm |
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oldguy
Senior Member
Cash: $ 751.85
Posts: 3656
Joined: 21 May 2006
Location: arizona
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quote:
Both years we had a larger refund by filing married seperatly but had to file married jointly do the Roth rule.
The 'Roth rule' only applies if one of you is non-working and you want to make a Roth contribution for your non-working spouse. You both work so it won't affect your taxes.
As far as paying less taxes by filing separately, that is pretty rare. But it can happen if your wife is taking deductions against a business. You might want to verify this.
Regarding the 'larger refund' that you get, you can change your W4 so that you avoid over-paying duringthe year, no need to wait up to 16 months to get your money refunded to you, you can have it now.
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Thu Mar 15, 2007 4:46 pm |
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