SecondCor521
Give me a museum and I'll fill it. (Picasso) Give me a forum ...
Hi all,
(Yes, I'm back to posting...rarely.)
So I FIREd last month and am looking at 2016 tax planning, which will be a different game than it was when I was working.
Here's some basic background:
I'll probably be filing single with 2 dependent children
ACA estimated AGI of $39K (to get 87% cost sharing reduction)
Almost certainly will take the standard deduction
A few thousand in earned income from employment before FIRE
For the sake of argument, assume I have enough cash on hand not to need any withdrawals from my portfolio.
I have three mostly independent variables that I can tweak:
X. IRA to Roth IRA conversion to create taxable AGI.
Y. Contribution to traditional IRA to potentially get the saver's credit.
Z. Capital gains that I can realize (to get 0% capital gains rate).
I'm OK with paying anything up to a 20% marginal rate but would prefer to avoid paying at any rate above that.
So here's my tentative plan for optimizing my 2016 taxes:
1. Plug all of my data into something like TaxAct.
2. Create an X-Y spreadsheet of IRA to Roth IRA conversions at $1K intervals and traditional IRA contribution at $500 intervals and note the federal tax owed.
3. Examine the results of step 2 to find (hopefully) a sweet spot with the highest conversion that still results in a ~20% marginal rate.
4. Fix the conversion amount (X) and contribution amount (Y) based on the sweet spot.
5. Vary the Z variable at $1K intervals and again note the federal tax owed. Try to maximize Z without exceeding a ~20% marginal rate (i.e., find the spot where the 0% cap gains rate is "used up").
Will this work? Any improvements? Any advice?
Thanks in advance!
(Yes, I'm back to posting...rarely.)
So I FIREd last month and am looking at 2016 tax planning, which will be a different game than it was when I was working.
Here's some basic background:
I'll probably be filing single with 2 dependent children
ACA estimated AGI of $39K (to get 87% cost sharing reduction)
Almost certainly will take the standard deduction
A few thousand in earned income from employment before FIRE
For the sake of argument, assume I have enough cash on hand not to need any withdrawals from my portfolio.
I have three mostly independent variables that I can tweak:
X. IRA to Roth IRA conversion to create taxable AGI.
Y. Contribution to traditional IRA to potentially get the saver's credit.
Z. Capital gains that I can realize (to get 0% capital gains rate).
I'm OK with paying anything up to a 20% marginal rate but would prefer to avoid paying at any rate above that.
So here's my tentative plan for optimizing my 2016 taxes:
1. Plug all of my data into something like TaxAct.
2. Create an X-Y spreadsheet of IRA to Roth IRA conversions at $1K intervals and traditional IRA contribution at $500 intervals and note the federal tax owed.
3. Examine the results of step 2 to find (hopefully) a sweet spot with the highest conversion that still results in a ~20% marginal rate.
4. Fix the conversion amount (X) and contribution amount (Y) based on the sweet spot.
5. Vary the Z variable at $1K intervals and again note the federal tax owed. Try to maximize Z without exceeding a ~20% marginal rate (i.e., find the spot where the 0% cap gains rate is "used up").
Will this work? Any improvements? Any advice?
Thanks in advance!