Question

Mitch (66) and Betsey (67) are married and file a joint return. They are both retired and live in Colorado. Their only income in the current tax year is $29,000 from Mitch's 401(k), and $22,000 from Betsey's IRA. These amounts were included in federal taxable income and are not considered a premature distribution. How much of this income may they subtract on their Colorado return?

$51,000

$46,000

$40,000

$0

Answer 1

401 (K) Plan and IRA are the two types of retirement plans available for the employees for the retirement savings. An employee can have both IRA account and 401 (K). The contributions made towards both of them are tax deductible, but they are taxed at the time of withdrawals. If the employee withdraws before attaining the age of 59 1/2, attracts the penalty. So, i order to avoid the penalties, the employee have to withdraw only on attaining the age of 591/2.

In the given case, Mitch (66) and Betsey (67) both are marries and files a joint return. Mitch has income of $29,000 from 401 (K) and Betsey has an income of $22,000 from IRA. So, they have to show an income tax return of $51,000 in their joint income tax return. There is no deduction and is taxable on the whole amount of withdrawal.

Hence, the correct option is $0 and other options are incorrect