KNOWLEDGE|
(1) |
Deduction Limitation If you are an eligible educator, you can deduct up to $300 of qualified expenses you paid. If you and your spouse are filing jointly and both of you are eligible educators, the maximum deduction is $600. Neither spouse can deduct more than $300 of his or her qualified expenses. |
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(2) |
Qualified Expenses (a) Qualified expenses include ordinary and necessary expenses paid in connection with books, supplies, equipment (including computer equipment, software, and services), and other materials used in the classroom. An ordinary expense is one that is common and accepted in your educational field. A necessary expense is one that is helpful and appropriate for your profession as an educator. An expense does not have to be required to be considered necessary. (b) The cost of professional development is deductible. (c) Qualified expenses do not include expenses for home schooling or for nonathletic supplies for courses in health or physical education. |
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(1) |
Deductible traditional IRA
A taxpayer's deduction for a traditional IRA contribution is limited if the taxpayer or spouse participates in an employer-sponsored plan. The allowed deductible contribution phases out proportionately within the following ranges:
(b) AGI Phase-out of Married filing jointly is $123,000 – $143,000 (2024) and $126,000 – $146,000 (2025)
If a married taxpayer is not an active participant in an employer's retirement plan, but the spouse is, the deduction for the spouse who is not an active participant is phased out based on the following AGI limitations:
(b) AGI Phase-out of Married filing separately is $0 – $10,000 (each spouse is subject to this limitation—both the participant and the nonparticipant) |
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(2) |
Roth IRA
The ability to contribute to a Roth IRA is constrained by modified adjusted gross income (MAGI) phase - out ranges, which differ based on filing status. In 2024, unmarried taxpayers encounter a phase - out between $146,000 and $161,000. For married couples filing jointly, the phase - out range is $230,000–$240,000 in 2024, and this range will increase to $236,000–$246,000 in 2025. Married taxpayers who file separately have a phase - out range of $0–$10,000. It is worth noting that the contribution limits remain the same, irrespective of whether taxpayers are active participants in employer-sponsored retirement plans, such as SEP or SIMPLE IRAs.
Unlike traditional IRAs, Roth IRAs are not subject to the required minimum distribution (RMD) rules during the lifetime of the account owner. Qualified distributions from a Roth IRA have two prerequisites: the distribution must take place at least five years after the taxpayer’s first contribution to a Roth IRA, and it must be made under one of the following circumstances:
(a) after the taxpayer reaches the age of 59½; (b) or to a beneficiary after the taxpayer's death; (c) or when the taxpayer is disabled; (d) or for a first - time homebuyer to purchase a principal residence..
Moreover, rollovers from traditional IRAs to Roth IRAs (known as Roth conversions) are permitted, but these transactions are subject to specific tax treatment.
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(3) |
Nondeductible traditional IRA
If a taxpayer's deduction for a contribution to a traditional IRA is limited, a nondeductible traditional IRA contribution can be made instead.
For those who reach age 72 after December 31, 2022, minimum distributions are required to be taken by April 1 of the year following the year in which the taxpayer reaches age 73.
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(1) |
Pretax contribution limits (2025) Self is $4,300 and Family is $8,550 in 2025; Add $1,000 for taxpayer's age 55+ |
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(2) |
High-deductible plan A high-deductible health plan (HDHP) is a plan that has a minimum annual deductible (indexed for inflation) of $1,650 for Self and $ $3,300 for family in 2025. |
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(3) |
Out-of-pocket limitation
Out-of-pocket expenses include deductibles, co-payments, and other amounts (other than premiums) that must be paid for plan benefits. Maximum Out-of-Pocket Expenses for self is $8,300 and or family is $16,600 in 2025.
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Disclaimer All information in this article is only for the purpose of information sharing, instead of professional suggestion. Kaizen will not assume any responsibility for loss or damage. |
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