Fee based IRA question
Was having a discussion with client about paying fees with pre-tax dollars inside the IRA VS paying the fees from an outside cash acct and taking a tax deduction. Assuming his tax rates are the same all along isn’t this a wash? If so how can I clearly illustrate this to him?
Permalink Submitted by mk foss on Thu, 2010-10-14 16:09
If the fees are paid within the IRA, the IRAs growth will be affected because there will be slightly less assets to grow. If the fees are paid outside the IRA, the tax deduction is not certain. The fees go into the category that must exceed 2% of gross income. Once you’ve passed that hurdle, those deductions are not allowed for AMT purposes. However, the issue is complicated because folks who pay the AMT may have some partial benefit from deducting the fees and may get a state tax deduction.
I think there are too many variables to say that it’s a wash.