Income deferral through a RSA- 1 plan (Admended)
What tax advantages,if any, does it give a state employee who works for a college to tax-defer all of their income the year before their retirement? If they are in a 20% tax bracket (but have deferred their income) do they get their taxes back if they take a 3200 withdrawal out of a 403b ?
Permalink Submitted by Alan - IRA critic on Thu, 2015-01-08 20:48
Yes, they would have to file a return to receive a refund of the 20% mandatory withholding on the 403b distribution. It may not be an advantage if taxable income is reduced below 0 and the RSA deferral will be taxed in the future as RMDs or otherwise. Deferrals in higher brackets are likely to have a net tax saving, but at the lower brackets or certainly below the taxable income amount the long term affect will probably be negative due to future taxes on the deferred amount.