Here how the extended deadline can be useful:
- Maximize deductions. Until I do my tax return, I am not sure whether a deductible IRA contribution is what I want to do for a tax year. Thus, being able to wait until April 15, 2013, enables me to make a decision when I have all the income, deduction and credit information to determine the decision that will minimize our tax liability.
- Maximize Roth conversion benefits. For Roth conversions, taxpayers pay taxes on the amount that is converted. If the value increases, the gain is tax free. If the value decreases, taxes are still based on the original converted amount. Thus, the ability to recharacterize in 2013 allows taxpayers to unconvert a Roth conversion that has decreased in value.
For more on The Practice of Personal Finance, check back every Wednesday for a new segment.
This is not financial advice. Please consult a professional advisor.
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