Question

Elliot has $500,000 of earned income. He is 62. He is single. He asks you about his options for a Roth or Traditional IRA. He is an active participant in his employer's 401(k) plan.

Which of the following would be the best advise for Elliot?

	a.	Your income is over the phase-out ranges for both Traditional and Roth IRAs, so you aren't allowed to make a contribution to either one.
	b.	You are not allowed to contribution to either type of IRA because you participate in the 401(k) at work.
	c.	You are over the contribution limit for a Roth, but you are eligible to make a non-deductible Traditional IRA contribution. The contribution would build up tax-deferred, although you will be required to start taking minimum distributions at age 70 1/2.
	d.	You cannot contribute to a Traditional IRA because you are particiapte in the 401(k) plan at work, but you are elgible to contribute to a Roth IRA.

Charlie and Gail are high-income/high net worth taxpayers. They have made all retirement plan contributions they are eligible to make. They come to you to ask about an HSA. How should you advise them?

	a.	If you have a high deductible health insurance plan, you are eligible to establish an HSA and take an above-the-line tax deduction for qualified medical expenses IF you are not phased out based on AGI.
	b.	If you have a high deductible health insurance plan, you are eligible to establish an HSA and make a deductible contribution to the plan IF you are not phased out based on AGI.
	c.	If you have a high deductible health insurance plan, you are eligible to establish an HSA and take an above-the-line tax deduction for qualified medical expenses.
	d.	If you have a high deductible health insurance plan, you are eligible to establish an HSA and make a deductible contribution to the plan.

Answer 1

Question:

Elliot has $500,000 of earned income. He is 62. He is single. He asks you about his options for a Roth or Traditional IRA. He is an active participant in his employer's 401(k) plan.

Which of the following would be the best advise for Elliot?

Roth IRA: contribtution limit to ROTH IRA phase outs completely when the AGI of the single filing taxpayer for 2017 is over $196,000. Given AGI of the taxpayer is more than $196,000 and he is not eligible for ROTH IRA contribution.

Traditional IRA: taxpayer participating in a qualified retirement plan can not contribute to traditional IRA if AGI is over $72,000 for 2017 for single filing taxpayers and hence taxpayer is not eligible.

As due to AGI limitations the taxpayer is not eligible contribute of the given options, option -a is correct and others are incorrect.

question:

Charlie and Gail are high-income/high net worth taxpayers. They have made all retirement plan contributions they are eligible to make. They come to you to ask about an HSA. How should you advise them?

Explanation for incorrect options:

Option a and b are incorrect because AGI limitations not applies to HSA contributions.

Option c is incorrect because HSA contribution is a deduction to AGI but not medical expenses.

Correct option is option-d. Taxpayers having high deductible insurance plan, takes HSA to cover medical expenses with in the deductible limit of the insurance plan. contributions to HSA are limited and are tax deductible. Distributions from HSA used for medical expenses are excluded from gross income.