IRA Rules

Archive for April, 2006

Charting a Course to Wealth – Part 4

Question: Is it ever better to purposefully make less money for tax purposes?

For example, would it be better to purposefully make less money in order to be eligible to contribute to a Roth-IRA and enjoy its long-term tax benefits?

Answer: Not really.
The more you make, the more you take home.

In the case of a Roth IRA, the contribution limits are based on age not income.
Showing a low income if anything can reduce the amount you can contribute.
For ex, you can contribute up to 5k if you are 49 yo or younger.
But if you only make 4k you can only contribute 4k.

The closest I can think of a benefit of what you are saying is being able to ‘show on paper’ that you actually earned less than you did. But not in the instance that you are saying where you actually earn less money. Showing less is dfifferent from actually earning less.

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