 IRA
considerations, tax breaks for motor homes
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 Dear
Tax Talk,
I have several individual retirement account tax questions.
What factors should a middle-aged single man
take into account when designating a beneficiary for his IRA? How
does he minimize taxes upon his death? How
does he defer required minimum distributions and final payout for
as long as possible? Is there a good reference
guide on such subjects that you would recommend? Many
thanks.
-- Bob
 Dear
Bob,
What's important at your age to understand is
that you are naming a beneficiary that can later be changed as long
as it's before April 1st of the year following the year that you
attain age 70½. If you die before the required date for making minimum
distributions (that April 1st date), you have to understand what
the consequences will be to the beneficiary of the IRA. Generally,
if you die before reaching that April 1st date, your beneficiary
must take into income all of the IRA money no later than the end
of the calendar year that is five years after your death.
An important exception to this for an unmarried individual
is a rule that permits a "designated beneficiary" to pay out the
IRA over his or her life. A designated beneficiary is someone other
than your estate, an entity or certain trusts, or, in other words,
basically it is an individual. To qualify for this exception the
designated beneficiary must begin making withdrawals over his or
her life expectancy no later than Dec. 31 of the year after the
year of your death.
Most unmarried individuals tend to name their parents
or siblings as their beneficiaries. If your goal were to maximize
the payout period for the beneficiary, then it would be wiser to
name a niece or nephew to inherit the IRA.
As you approach age 70½, you will need to revisit
your beneficiary to determine the appropriateness. For example,
at that time you may want to accelerate your IRA and therefore ignore
your beneficiary in making the required distribution calculations.
Since, I myself am approaching middle age, I will probably not be
around to answer that question.
Retirement plan distribution rules are quite complex.
The Internal Revenue Service recently announced that it is in the
process of rewriting these rules. Bankrate.com will look at the
new rules in a March 21 story. Check back then. Additional retirement
plan information can be found at IRA
Junction.
Tax breaks for motor homes
Dear
Tax Talk,
Is the interest paid on a motor home fully tax-deductible? Thanks
-- Tim
Dear Tax Talk,
I am looking into buying a pop-up camper. I was told that if I buy
one that has a kitchen (all do) and a bathroom, then it would be
considered a second home. In addition, I own some property (i.e.,
location for second home someday) where the camper would usually
reside. Thanks.
-- DRose
Dear
Tim and DRose,
Home mortgage interest is tax-deductible. You can deduct interest
paid on a mortgage secured by your primary home and the interest on
a mortgage of a second home, such as a vacation home. A second home
includes a motor home or camper provided it contains sleeping and
living accommodations. To qualify, the living accommodations of the
second home must include a toilet and cooking facilities.
I'm not sure if you are asking if the land on which
you park the motor home would also qualify as part of the second
home. I looked extensively for an answer to this question, and I
could not find a definite answer. I believe that the interest paid
on any mortgage on the land would not qualify since the debt that
secures it is not securing a residence, but rather the residence
(the motor home) has a separate debt. I believe a boat owner would
be in the same position with justifying a dock as part of the home.
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