Congress may change the rules that allow for tax-free withdrawal of Roth IRA contributions. There is no current tax deduction, but money going into the Roth IRA is taxed at the taxpayer's current marginal tax rate, and will not be taxed at the expected higher future effective tax rate when it comes out of the Roth IRA. Accessed July 24, 2020. Heirs will have to pay taxes on withdrawals from traditional IRA assets they inherit, and must continue to take mandatory distributions (although they will be based on their life expectancy). The principal difference between Roth IRAs and most other tax-advantaged retirement plans is that rather than granting a tax reduction for contributions to the retirement plan, qualified withdrawals from the Roth IRA plan are tax-free, and growth in the account is tax-free.[1][2]. For a self-employed individual or a partner in a partnership, compensation is the individual’s net earnings from their business, less any deduction allowed for contributions made to retirement plans on the individual’s behalf and further reduced by 50% of the individual’s self-employment taxes. The losses stem from both Roth conversions and the ability to make nondeductible IRA contributions and then immediately convert them to Roths.[8]. If the beneficiary of the Roth IRA is a trust, the trust must distribute the entire assets of the Roth IRA by December 31 of the fifth year following the year of the IRA owner's death, unless there is a "Look Through" clause, in which case the distributions of the Roth IRA are based on the Single Life Expectancy table over the life of the beneficiary, terminating upon the death of the beneficiary. The contribution limits are the same for traditional and Roth IRAs., The maximum annual contribution an individual can make in 2019 and 2020 to a Roth IRA. Accessed July 24, 2020. Roth Conversions not only convert highly taxed IRA income to tax-free income, but if the IRA holds alternative assets such as REITs (Real Estate Investment Trusts), Leasing Programs, Oil and Gas Drilling Partnerships and Royalty Partnerships, a Fair Market Valuation (FMV) or "Substantially Discounted Roth-Conversion" may provide reductions in the conversion income tax by up to 75%, possibly more, depending on assets and the Fair Market Valuation.

On the other hand, taxing earnings on an account which were promised to be untaxed may be seen as a violation of contract and completely defeat the purpose of Roth IRAs as encouraging saving for retirement – individuals contributing to a Roth IRA now may in fact be saving themselves from new, possibly higher income tax obligations in the future. Of course, even if you expect to have a lower tax rate in retirement, you'll still enjoy a tax-free income stream from your Roth.

Prior to 2010, two circumstances prohibited conversions: Modified Adjusted Gross Income exceeding $100,000 or the participant's tax filing status is Married Filing Separately.

Accessed July 24, 2020. 401(k) Contribution Limit Increases to $19,500 for 2020; Catch-Up Limit Rises to $6,500. Accessed July 24, 2020. Additionally, the beneficiary will be subject to income tax unless the inheritance is a Roth IRA.)

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