If you make your living from a Sched D only, can contribute to IRA?

Discussion in 'Interactive Brokers' started by jackpearson, Apr 12, 2011.

  1. can you make a non-deductible regular IRA contribution if your only income is from Schedule D cap gains?
     
  2. no
     
  3. Roark

    Roark

    On the upside, you don't owe any tax for Social Security, correct?
     
  4. No, only earned income can be used.
     
  5. There are 2 broad categories of income:

    Earned income: Wages, salary, sales commission, bonus, etc

    Unearned income: interest, dividends, capital gains, etc

    Historically, unearned income was exempt from Social Security taxes, Medicare taxes, FUI, SUI, etc.

    As part of the mandated health care legislation passed by Congress and signed into law by the President, unearned income will be subject to the Medicare tax starting in 2014.

    This new 2.9% tax will apply to unearned income such as interest, dividends and capital gains for individuals with income over $200k and couples with income over $250k.

    And:

    "The Center for Tax Justice points out the changes would only affect 2.3% of taxpayers in 2014. And the tax would not apply to income earned through tax-deferred retirement accounts.

    Still, those higher-income taxpayers would foot a significant chunk of the bill's revenue streams. The non-partisan Joint Committee on Taxation estimates that Obama's proposal to raise the Medicare payroll tax and expand the tax to unearned income would bring in $183.6 billion in revenues from 2010 to 2019. That's 44% of estimated total revenues needed to pay for health care, making it the biggest portion of all the proposed changes."

    Watch your wallet!