Parsons & Wright, CPAs strives to be the best that we can be in every endeavor that we encounter. Holding ourselves and our firm to a high standard we will provide our clients with professionalism, quality, and efficiency.
The story of Parsons & Wright starts in 1989 when 2 local CPA firms came together to form the partnership that still exists today. We have seen changes in staff, tax laws, and audit requirements but the quality and outstanding accounting services that Parsons & Wright offers has not changed.
With fast paced times full of change and uncertainty you can count on Parsons & Wright to be consistent in the services that we provide. That consistency has allowed us to be mindful of new and more efficient ways to serve you.
There are two types of IRAs: traditional IRAs and Roth IRAs. Traditional IRAs defer taxation of investment income, and withdrawals are taxable income except for withdrawals of previously nondeductible contributions. In most cases, however, contributions are deductible. Roth IRAs are subject to many of the same rules as traditional IRAs. Still, there are several differences, the primary one being that contributions are not deductible and are made after tax, but qualified distributions are generally tax-free.
If you have income from wages or self-employment income, you can contribute up to $7,000 for 2025 (also $7,000 for 2024). IRAs are available even to children who meet these conditions. Individuals aged 50 and older can contribute an additional $1,000 for a total of $8,000 for 2025 (the same as for 2024).
Yes. Contributions of $7,000 for each spouse are allowed for 2025 if the couple's wages or self-employment earnings are $14,000 or more. If less, the contribution amount cannot exceed your or your spouse's taxable compensation for the year. (The same limits apply for 2024.)
Withdrawals, if they qualify, are completely exempt from income tax, unlike most withdrawals from other retirement plans.
You can quickly build up a Roth IRA account by converting traditional IRAs into Roth IRAs, but there is a tax cost.
Because Roth IRAs aren't subject to age-triggered required minimum distribution rules, more money can be left in an account and passed on to heirs than is allowed under other plans.
Not everyone can contribute to a Roth IRA. The following conditions apply:
The ability to contribute phases out if modified adjust gross income (MAGI) exceeds certain amounts. For married taxpayers filing jointly, the 2025 phaseout range is $236,000 to $246,000. For single and head-of-household taxpayers, the 2025 phaseout range is $150,000 to$165,000. (For 2024, the phaseout ranges are $230,000 to $240,000 and $146,000 to $161,000, respectively.) You can make a partial contribution if your MAGI falls within the applicable range, but no contribution if it exceeds the top of the range.
As with traditional IRA contributions, you must have earnings from personal services equal to or greater than your Roth IRA contribution. The 2025 (and 2024) IRA contribution maximum of $7,000 (plus an additional $1,000 for taxpayers age 50 or older) applies to traditional and Roth IRAs on a combined basis. So your maximum Roth IRA contribution is reduced by any traditional IRA contributions you make for the year. If you make the maximum contribution to a traditional IRA, you can't contribute to a Roth IRA.
Yes, subject to the income conditions above, contributions of $7,000 each are allowed for 2025 if the couple's earnings are at least $14,000 for 2025 ($15,000 if one of you is age 50 or older or $16,000 if both of you are age 50 or older. The same limits apply for 2024.) Each spouse can contribute up to the current limit; however, the combined total of your contributions can't be more than the taxable compensation reported on your joint return.
The following is a brief list of negative issues regarding Roth IRAs:
Roth IRA contributions are not tax-deductible.
Unless you start contributing when you're very young, to build a sizable Roth IRA, you will likely have to convert some or all of a traditional IRA. Conversions are taxable.
If a contribution to a regular IRA has been converted into a contribution to a Roth IRA, it can't be converted back into a contribution to a regular IRA. This provision prevents a taxpayer from using recharacterization to unwind a Roth conversion.
How are my heirs taxed on inherited Roth IRA wealth?
Your heirs are taxed as follows:
No tax paid on withdrawals as long as the funds have been in the Roth IRA for at least five years.
Starting in 2020 (SECURE Act), an heir inheriting a Roth IRA must withdraw the funds within ten (10) years after the account owner's death (some exceptions apply). Heirs with Roth IRAs inherited before 2020 can spread the withdrawal over their life, continuing the tax shelter for amounts not withdrawn.
Estate tax treatment is the same as for traditional IRAs.
This Content is for informational purposes only. Nothing contained herein constitutes accounting, tax, financial, investment, legal or other professional advice, and, accordingly, the author and the distributor assume no liability whatsoever in connection with its use. This Content is not an exhaustive explanation of any topic, practice or process. You should seek the advice of a licensed professional before making any accounting, tax, financial, investment or legal decision.
