Taxation and its impact on pension plans and college savings plan

Running head: TAXATION 1
Taxation
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TAXATION 2
Pension plans are one of the most common strategies to pay less income tax
statement. The tax benefits of pension plans is positive at the time of investing, but not so
much when recovering the money.In addition to assistance when the time comes for
retirement, the taxation of pension plans makes them an element to take into account when
making our tax planning. Its main advantage is that the contributions are subject to rebate
(Ricardo, 2016).
Taxation of pension plans
On the contrary, they have tax disadvantages at the time of computation recovery, that is,
when recovering the money, and a limitation to the cases in which you can recover the
money. When dealing with pension in different years, it is important to differentiate taxation
from pension plans between the time of investment and the subsequent recovery of money
once retired (Ricardo, 2016).
Taxation of contributions to the pension plan
Pension plans allow us to pay less taxes on 2015 income for the investments we make.
We are talking about a reduction of the tax base margin that of a deduction to the use like the
one that for example is applied when buying a house.What happens is that the money you
allocate to the retirement plan will be subtracted from your tax base and, therefore, you will
pay less taxes. Contributions to colleges are made with after tax dollars. The earnings within
the college savings plan occur on a tax deferred basis.
I would encourage the Smiths to take advantage of tax deductions. An account that is opened
for a child at birth , which gets a monthly contribution of $100 means that by the time the