minimize taxes
I have both an ira and roth ira. I can take qualified distributions out of either one.
I want to start a business that requires a purchase of a vehicle, as well as, other business expenses.
I appreciate some guidance as the best way to proceed to minimize my taxes.
For example, do I make business purchases from my roth distributions, then deduct these from any business income?
Is there a efficient ratio of roth/trad ira distributions to minimize tax while maintaining maximum money in my roth?
Thanks,
Frank
Permalink Submitted by Alan - IRA critic on Sun, 2013-05-12 03:45
Generally, you would take the distribution from the Roth IRA if you are in a high tax bracket in a particular year, because the Roth distribution will not be taxable. Conversely, if you are in a low bracket, take the distribution from the TIRA, which will be taxable and subject to penalty. If you spend the distributed funds for deductible business expenses, you can deduct the espenses on your business form regardless of which type IRA you took the distribution from.
Permalink Submitted by Frank on Mon, 2013-05-13 15:58
Am I correct in my understanding, for example; I take $10 from my TIRA and $5 from my RIRA and have $5 worth of business expenses, I can take the $5 deduction against my taxable income from the TIRA?
Permalink Submitted by Alan - IRA critic on Mon, 2013-05-13 16:03
Yes, basically correct. However, if the TIRA distribution occurs before age 59.5 there is also a 10% penalty and the business deduction does not reduce the penalty, just the amount of taxable income from the IRA.