President Joe Biden's new federal budget proposal brings back the battle he started last year to keep high-income Americans from using individual retirement accounts to cut their taxes.
The proposed budget calls for the Internal Revenue Service to squeeze about $23.6 billion in extra revenue out of high-income taxpayers over the next decade by limiting their use of individual retirement accounts.
The projected 10-year savings total has increased from the 10-year savings amount Biden administration budget analysts released a year ago.
The administration has not yet given details about the kinds of IRA rule changes to be included in the final version of the new budget proposal, which would affect federal government spending in fiscal year 2025, which starts Oct. 1. But the new IRA provision appears to be similar to the IRA provision the Biden administration in its "Greenbook," or detailed description of revenue-raising proposals, for the fiscal year 2024 budget proposal.
What it means: The Biden administration has noticed that clever use of IRAs can save high-income and wealthy people a lot of money.
The IRA gameboard: Taxpayers get tax breaks when they contribute to traditional IRAs but pay ordinary federal income taxes on the distributions.
Taxpayers put after-tax income into Roth IRAs and can pull distributions out without having to pay federal income taxes on the income.
