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Congress has decided to nudge the economy with a tax stimulus proposal for first time home buying. Please analyze these four alternative investments ( traditional
Congress has decided to nudge the economy with a tax stimulus proposal for first time home buying. Please analyze these four alternative investments traditional IRA, Roth IRA, personal investments, and retirement investments and provide recommendations for these first time homeowners. Specifically, your analysis should address:
what is the potential short and long term net worth effects to the taxpayer and what are the potential treasury effects to the government?
You also have the option to consider alternative strategies and possible implementation issues. Remember you are a consultant to the taxpayer. Thus, you should be pro taxpayer and not pro government in your analysis. Finally, be sure you alternatives are comparable.
Please review the below scenarios and provide the best solution for the new homebuyers based on the information below. The goal is to determine which strategy maximizes their net worth while minimizing tax liabilities and other costs
First, a person is permitted to withdraw up to from their personal IRA. Under this alternative, the distributed money is exempted from the early distribution excise tax. Any taxable amount withdrawn, however, from the IRA is included in gross income subject to federal income tax.
Second, a person is permitted to withdraw up to $ from his or her Roth IRA. Under this alternative, the distributed money is exempted from the early distribution excise tax. Any taxable amounts withdrawn from the Roth IRA are included in gross income. But you can assume that the amount withdrawn is exempt from federal and state income tax.
Third, a person may wish to withdraw the monies from his or her private investments eg personal portfolio of assets or borrow from his or her retirement fund egk plan
Other factors to consider:
The taxpayer is married and files a joint tax return; both are years old: both are planning to retire at age ; and the couple is in the marginal tax bracket for federal and state income tax purposes.
The couple participates in their companys k plans, which permits them to borrow funds. But they must be repaid within years at an interest rate of of which are transactions fees and is added to the taxpayers k plan.
The couple has an investment portfolio stocks and bonds with a solid rate of return on their investments. Furthermore, each spouse has made contributions to his and her personal Traditional and Roth IRAs.
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