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What is the contribution limit for a SEP IRA?
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For a SEP IRA, contributions can be up to 25% of earned income.
Are premium payments for personal life insurance policies tax-deductible?
No, premium payments for personal life insurance policies are not tax-deductible.
What is a Modified Endowment Contract (MEC) and how is it taxed?
An MEC is an overfunded life insurance policy that fails the 7-pay test. It loses the taxation benefits of standard life insurance, and taxes on loans and distributions apply if taken before age 59½, along with penalties.
What penalty is typically imposed for early withdrawal from a qualified plan?
A 10% penalty is usually imposed for early withdrawals (before age 59½) from a qualified plan.
What defines a SIMPLE IRA regarding employer contributions?
In a SIMPLE IRA, employer contributions can be up to 3% of an employee's annual salary.
What happens during a rollover of a qualified plan that makes it tax-free?
A rollover is tax-free if the funds are directly transferred from one plan to another without being given to the individual first.
Which qualified plan does not require mandatory withdrawals at age 72?
Roth IRA does not require mandatory withdrawals at age 72.
What are the tax benefits of contributions to a Traditional IRA?
Contributions to a Traditional IRA are tax-deductible, but withdrawals are taxed as income.
What happens to the death benefits of a life insurance policy paid to an estate?
Death benefits paid to an estate are subject to federal taxation.
Under what conditions are accelerated benefits from a life insurance policy tax-free?
Accelerated benefits are generally tax-free if the insured is terminally ill or the benefits are for medical intervention.
What is the tax treatment of dividends received from a life insurance policy?
Dividends are not taxed as they are considered a return of unused premium, but interest on dividends left with the company is taxed.
Under what circumstances are there exceptions to the 10% penalty for early withdrawals from qualified plans?
Exceptions include withdrawal for reasons such as death, disability, education, first home purchase, and catastrophic medical expenses.
What is the primary tax difference between pre-tax and post-tax contributions?
Pre-tax contributions are made before taxes and are taxed upon withdrawal. Post-tax contributions are made after taxes and are not taxed upon withdrawal if certain conditions are met.
Which types of organizations are eligible to offer a 403b plan?
Non-profit organizations such as schools and churches can offer 403b plans.
What tax treatment is given to employer contributions in a qualified plan?
Employer contributions are tax-deductible for the employer and decrease the employee's taxable income for that year.
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