Chapter_15__Handout_Notes - Chapter 15 Choice of Business...

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Chapter 15 Choice of Business Entity Qualified Plans (tax benefits) All dollars going in (within the allowed limits) are pre-tax All withdrawals are subject to tax at ordinary rates Can not discriminate (Highly compensated can’t get a bigger advantage) There are age and service requirements (chose when set up the plan) There are limits on contributions or benefits Defined contribution (most popular) Defined benefit (can be useful in creative situations but can be costly) Keogh (plans that can be used by self-employed individual or partners) Use net S/E income as basis for calculation for owners S/E income less ½ of S/E tax Maximum contribution for owner is 20% of above not to exceed $46,000 Can’t discriminate IRAs – refer to Table 6-2 Traditional IRA Annual limits (currently $5,000) Additional contributions allowed for those 50 years or over No contributions allowed after turn 70 ½ years old Need earned income
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Chapter_15__Handout_Notes - Chapter 15 Choice of Business...

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