Join Early Retirement Today
Reply
 
Thread Tools Search this Thread Display Modes
Reducing AGI
Old 12-23-2006, 12:13 PM   #1
Recycles dryer sheets
 
Join Date: Jan 2006
Posts: 162
Reducing AGI

Besides maxing out 401k/IRA contributions, I'm trying to find a way to reduce our AGI for 2007. The AGI limits on a Roth IRA account for married filing jointly is raised to $156k, but we may be getting close to that and I don't want to go over it.

What you folks do to reduce AGI when your IRA contributions are already maxed?
__________________

__________________
Seems to me that the corporation's race to the top is resulting in a race to the bottom for the employee's quality of life. FIRE can't come soon enough.
kjpliny is offline   Reply With Quote
Join the #1 Early Retirement and Financial Independence Forum Today - It's Totally Free!

Are you planning to be financially independent as early as possible so you can live life on your own terms? Discuss successful investing strategies, asset allocation models, tax strategies and other related topics in our online forum community. Our members range from young folks just starting their journey to financial independence, military retirees and even multimillionaires. No matter where you fit in you'll find that Early-Retirement.org is a great community to join. Best of all it's totally FREE!

You are currently viewing our boards as a guest so you have limited access to our community. Please take the time to register and you will gain a lot of great new features including; the ability to participate in discussions, network with our members, see fewer ads, upload photographs, create a retirement blog, send private messages and so much, much more!

Re: Reducing AGI
Old 12-23-2006, 12:41 PM   #2
Give me a museum and I'll fill it. (Picasso)
Give me a forum ...
 
Join Date: Jun 2005
Posts: 8,616
Re: Reducing AGI

There is a big difference between reducing AGI and reducing taxable income.
You've got to lower your income.
If you get a bonus, have your company pay it in the next year.
Grow old, so in the year you reach 50, you can start contributing more to your 401(k) and IRAs.
Ask for a pay cut.
Make sure that in your after-tax accounts, you do not receive dividends nor capital gains distributions. You can choose the funds, so this should be easy to do.
Do not have an emergency fund in a high interest savings account or money market fund.
Sell your stocks and investments at a loss. You can deduct $3000 of excess capital losses against ordinary income.
If self-employed, have a ton of expenses or avoid making a profit.
__________________

__________________
LOL! is offline   Reply With Quote
Re: Reducing AGI
Old 12-23-2006, 12:46 PM   #3
Give me a museum and I'll fill it. (Picasso)
Give me a forum ...
mickeyd's Avatar
 
Join Date: Apr 2004
Location: South Texas~29N/98W
Posts: 5,881
Re: Reducing AGI

You have the best kind of problem to have~you make too much this year and will make a bunch next year! Continue to invest in your taxable account in the most tax-efficient funds that you can find. Vanguard has a bunch of them. I like the TSM.
__________________
Part-Owner of Texas

Outside of a dog, a book is man's best friend. Inside of a dog, it's too dark to read. Groucho Marx

In dire need of: faster horses, younger woman, older whiskey, more money.
mickeyd is offline   Reply With Quote
Re: Reducing AGI
Old 12-23-2006, 01:54 PM   #4
Thinks s/he gets paid by the post
 
Join Date: Aug 2004
Location: Laurel, MD
Posts: 2,948
Re: Reducing AGI

If you have a flexible spending account benefit for health or dependent care, it will help reduce both AGI and taxable income
__________________
...with no reasonable expectation for ER, I'm just here auditing the AP class.Retired 8/1/15.
jazz4cash is offline   Reply With Quote
Re: Reducing AGI
Old 12-24-2006, 12:48 PM   #5
Moderator Emeritus
Nords's Avatar
 
Join Date: Dec 2002
Location: Oahu
Posts: 26,617
Re: Reducing AGI

Quote:
Originally Posted by kjpliny
What you folks do to reduce AGI when your IRA contributions are already maxed?
Man, I'm trying hard to work up a sympathetic frame of mind here. Sorry to hear about this disaster.

I think the best way to "struggle" with this problem would be to donate to the Roth until it phases out, then finish the IRAs with non-deductible contributions to conventional IRAs.

Someday you'll be within the AGI limits (2010 if not before) and you can convert the conventional IRAs to Roths.

You could deduct up to $3000 in cap losses that exceed your cap gains. But taking a cap loss is a losing strategy to begin with, and the tax deduction is a pretty sorry consolation prize.

With a lot of caveats & limits you could also try to take rental real estate losses against your real estate income. Of course this is a lot easier with a bigger mortgage and and even bigger depreciation.

But you could also try to lump together the deductions and exceed the standard deduction-- accelerate next year's payments for property taxes, mortgage payments, and medical expenses into the current tax year. And again that usually requires a fairly substantial mortgage to beat the standard deduction.
__________________
*
*

The book written on E-R.org, "The Military Guide to Financial Independence and Retirement", on sale now! For more info see "About Me" in my profile.
I don't spend much time here anymore, so please send me a PM. Thanks.
Nords is offline   Reply With Quote
Re: Reducing AGI
Old 12-25-2006, 08:31 AM   #6
Recycles dryer sheets
 
Join Date: Jan 2006
Posts: 162
Re: Reducing AGI

I've been looking at VYFXX as a way to reduce AGI on after-tax money currently sitting in Emigrant Direct account. It works out to be about the same return, but would reduce agi a few thousand if the income is not taxable. Is a tax-free MM fund safer than a tax-free bond fund or about the same risk?
__________________
Seems to me that the corporation's race to the top is resulting in a race to the bottom for the employee's quality of life. FIRE can't come soon enough.
kjpliny is offline   Reply With Quote
Re: Reducing AGI
Old 12-25-2006, 09:59 AM   #7
Give me a museum and I'll fill it. (Picasso)
Give me a forum ...
 
Join Date: Jun 2005
Posts: 8,616
Re: Reducing AGI

If interest rates go up, the MM fund will still stay at $1 a share, while a bond fund will drop in NAV. But if interest rates go down, the MM fund will still stay at $1 a share, while a bond fund will go up in NAV.

Yes, it is safer.
__________________
LOL! is offline   Reply With Quote
Re: Reducing AGI
Old 12-26-2006, 07:43 AM   #8
Give me a museum and I'll fill it. (Picasso)
Give me a forum ...
 
Join Date: Jul 2005
Posts: 5,411
Re: Reducing AGI

anyone unhappy about paying to much in taxes send me the extra money, ill gladely pay the tax for you
__________________
mathjak107 is offline   Reply With Quote
Re: Reducing AGI
Old 01-04-2007, 07:18 PM   #9
Recycles dryer sheets
 
Join Date: Jan 2006
Posts: 162
Re: Reducing AGI

Opened a Vanguard account and moved money into VYFXX...this should reduce my taxable interest income enough to keep the Roth limit away for another year.

Also, as a new years resolution, decided to track every dollar spent this year to see where it all goes. Played around with an older copy of Quicken but it seems too restrictive for me, so I'm just going to create a simple spreadsheet to record the activity and I can categorize it whenever I need to. Hoping I can identify some of the reasons my after tax savings isn't growing as fast as it should.
__________________
Seems to me that the corporation's race to the top is resulting in a race to the bottom for the employee's quality of life. FIRE can't come soon enough.
kjpliny is offline   Reply With Quote
Re: Reducing AGI
Old 01-04-2007, 08:15 PM   #10
Thinks s/he gets paid by the post
 
Join Date: Apr 2006
Posts: 1,487
Re: Reducing AGI

Quote:
decided to track every dollar spent this year to see where it all goes
i did this for several years ... it was a real eye-opener and likely the single best financial move i ever made.
__________________
d is offline   Reply With Quote
Re: Reducing AGI
Old 01-04-2007, 10:44 PM   #11
Recycles dryer sheets
 
Join Date: Jun 2005
Posts: 301
Re: Reducing AGI

Quote:
Originally Posted by LOL!

Ask for a pay cut.
Sell your stocks and investments at a loss.
If self-employed, have a ton of expenses or avoid making a profit.
But remember not to let the tail wag the dog - as others have said, it isn't a 'bad' problem to have. Anyone that wants to give me an extra buck, I'll gladly pay the 30 cents or whatever in taxes on it. Send 'em over....

- John
__________________
runchman is offline   Reply With Quote
Re: Reducing AGI
Old 01-04-2007, 11:36 PM   #12
Recycles dryer sheets
Linney's Avatar
 
Join Date: Nov 2006
Posts: 262
Re: Reducing AGI

Reducing AGI is pretty hard. I thought I found a way to do it last year --- special arrangement , my company allows us to take unpaid days during our holiday shutdown week. So I did just that, reducing my income about 2%. Or so I thought. Turns out that we are on a 15 day lag for crediting time off. I just reduced my 2007 income! I don't need to do that, doh, so now I'll need to file a timecard adjustment for last month <SIGH>.

Take a look at the first page of your IRS Form 1040. The number at the bottom of that page is the one used to determine your Roth eligibility. Look at the income section and see if there is anything you can reduce or defer. Look at the adjustments section and see if anything applies there. And good luck.
__________________

__________________
Linney is offline   Reply With Quote
Reply


Currently Active Users Viewing This Thread: 1 (0 members and 1 guests)
 
Thread Tools Search this Thread
Search this Thread:

Advanced Search
Display Modes

Posting Rules
You may not post new threads
You may not post replies
You may not post attachments
You may not edit your posts

BB code is On
Smilies are On
[IMG] code is On
HTML code is Off
Trackbacks are Off
Pingbacks are Off
Refbacks are Off


Similar Threads
Thread Thread Starter Forum Replies Last Post
AGI and State Tax Refund jazz4cash FIRE and Money 12 02-14-2007 09:54 AM
2% of AGI - miscellaneous deductions maddythebeagle FIRE and Money 2 02-03-2006 03:32 PM
Vanguard Reducing the Admiral Shares Threshold TromboneAl Other topics 16 05-10-2005 11:41 AM

 

 
All times are GMT -6. The time now is 07:43 AM.
 
Powered by vBulletin® Version 3.8.8 Beta 1
Copyright ©2000 - 2017, vBulletin Solutions, Inc.