$30K in your retirement account will give you a tax savings of around $10K to $15K. $30K put into your house saves you nothing tax wise, and actually negates your home mortgage deduction. A small business retirement account is one of the biggest tax breaks one can get, so take it while you can.
-john-
Some would say, "don't let the tax tail wag the dog." (not me) What bothers me is not your reply, but that the OP states he's planning for a
40% drop in income. I suppose if he finds himself in over his head, he can withdraw at what will certainly be a lower tax rate. As long as te new house purchase doesn't bury him, saving for retirement isn't a bad idea. (getting an equity line set up along with the new first mortgage is good, too.) JOEI'm starting to lean toward dumping this in a retirement acct. One question, does anyone know if there is a difference to my tax liability this year if I put this 30K into a SEP Ira vs a Keogh plan? This assumes I had no other retirement contributions. I only ask because it seems I can postpone the decision a few months if can get the full deduction through a SEP.
Kyle
joetaxpayer wrote:
I think the answer is yes, but I'd ask your accountant or tax guru because you want to get an authorative and right answer. There are a lot of details here, and you don't want to miss out on this deal because of a missing dot on an i somewhere. For example, I recall that the accounts have to be created before the end of the calendar year, even if they are not funded until April 15. Again, these laws change enough that normally only a pro can keep up to date.
-john-
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