I've read all the Roth FAQ's and have not been able to come up with the answer to my question. All the current information about Roth's concerns contributions, conversions, and eligibility. What are the specific tax rules for withdrawals?It at first seems like a question with a simple answer, because there are never any taxes to be paid if the withdrawals are within the guidelines for tax free withdrawals. Does this mean that the withdrawals will be totally absent from any income considerations on your tax return?The reason this is important is that the government loves to play class warfare politics with your income.(This is the most hideous and lothsome part about the tax code: little nooks and crannies designed to redistribute wealth). If your Roth withdrawals were considered income, for example, they could reduce your social security. So even though you pay no tax, they still consider it income for determining your social security tax rate. (That's right folks, if you have a large pension your ss benefits will be taxed at a higher rate). Currently, Social Security does not reduce your benefit level based upon IRA/pension income (only the tax side is affected by your level of pension income).If Roth withdrawals are NOT considered income, then a Roth would give another potential tax advantage over a deductible IRA (all other considerations being equal). See, the deductible IRA is considered income and must be declared as such when a withdrawal is taken. Income is bad if you want to receive SS benefits.This is the way I interpret the current tax code (look at page 25 of the 1040 instructions): social security benefits are taxed based upon only income which is taxable. Since Roth benefits are not taxable, a high income retiree would pay less SS tax than if income was distributed from a deductible IRA.Do the tax expert gods agree?rustedSoul
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