Married filing single

Non-investing personal finance issues including insurance, credit, real estate, taxes, employment and legal issues such as trusts and wills
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latesaver
Posts: 19
Joined: Thu Aug 03, 2017 3:35 pm

Married filing single

Post by latesaver » Fri Oct 06, 2017 1:31 pm

My wife and I both pull in enough $ such that contributing to a Roth IRA is out of the question. Unfortunately, so is the backdoor roth unless we want to be subject to pro rata rules.

I have the desire to pull the plug and retire in 10 years or less (I am 38, she's 34). I am guessing she will continue to work as she loves her job and gets great insurance for the family.

If I were to retire or go part time, would electing to file as married filing single open up the Roth contribution for me? i.e., the IRS only looks at my AGI to determine eligibility?

NOTE: I understand there are other tax consequences to this but am only curious about the above topic.

abonder
Posts: 157
Joined: Sat Nov 03, 2012 10:52 am

Re: Married filing single

Post by abonder » Fri Oct 06, 2017 1:38 pm

I really can’t speak to the implications of MFS.

Not your question, but there are lots of ways to get around the pro-rata issue. Do you have a current 401k that allows incoming rollovers. If it’s a decent plan with options and fees that work for you, then this is probably easiest way to “hide” a pre-tax IRA. Another option that I have seen people advocate is getting some limited self-employment income, opening a solo 401k that allows incoming rollovers (not Vanguard but yes fidelity) and then move any pre-tax IRAs into the solo 401k. White coat investor has written about it. Recommends income from doing surveys, consulting, moonlighting....anything that generates some non-w2 income.

Might be worth thinking about, especially if MFS has other less-advantageous issues.
Last edited by abonder on Fri Oct 06, 2017 1:40 pm, edited 1 time in total.

Alan S.
Posts: 6854
Joined: Mon May 16, 2011 6:07 pm
Location: Prescott, AZ

Re: Married filing single

Post by Alan S. » Fri Oct 06, 2017 2:04 pm

latesaver wrote:
Fri Oct 06, 2017 1:31 pm
My wife and I both pull in enough $ such that contributing to a Roth IRA is out of the question. Unfortunately, so is the backdoor roth unless we want to be subject to pro rata rules.

If I were to retire or go part time, would electing to file as married filing single open up the Roth contribution for me? i.e., the IRS only looks at my AGI to determine eligibility?

NOTE: I understand there are other tax consequences to this but am only curious about the above topic.
The filing status is MFS (married filing separate). This filing status is far different than filing as a single taxpayer which you are not eligible to do. Filing MFS will typically result in higher taxes and more restrictions than filing jointly. For example, if one spouse itemizes the other must also itemize. For regular Roth IRA contributions, if you lived with your spouse at anytime during the year, your permitted Roth contribution begins to be phased out at 0 modified AGI and is completely eliminated at 10k MAGI. This pretty much eliminates regular Roth contributions for most couples when filing MFS.

Occasionally, you here of people who make these contributions anyway and later become aware that they are excess Roth contributions that incur the 6% annual excise tax until the excess is removed.

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