Question

13. Which of the following strategies allow an individual to receive a tax deduction (federal) in...

13. Which of the following strategies allow an individual to receive a tax deduction (federal) in the current period and potentially receive tax free income in the future?

I. Contribute to a Roth IRA and qualify for the Retirement Savings Contribution Credit.

II. Contribute to a 529 plan and receive qualified distributions tax free.

III. Contribute to a traditional IRA and qualify for the Retirement Savings Contribution Credit.

IV. Contribute to a Health Savings Account and take qualified distributions in the future.

I & IV only

I, II, III, & IV

I, III, & IV

IV only

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Answer #1
  • A Roth IRA is a special retirement account where you pay taxes on money going into your account and then all future withdrawals are tax free
  • All withdrawals from a Traditional IRA are included in gross income, which are subject to federal income tax
  • Health savings account participants do not have to obtain advance approval from their health savings account trustee or their medical insurer to withdraw funds, and their funds are not subject to income tax if they are made for qualified medical expenses.

Correct answer us I & IV only

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