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Tax planning for first year retirement
Old 01-13-2015, 07:37 AM   #1
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Tax planning for first year retirement

2015, our ER year, will be the first time I am looking forward to doing taxes (in 2016).

1) Finally get to make a deductible IRA contribution (or a direct Roth contribution but that doesn't make financial sense)

2) I think we may get the savers credit!

Only working through March, and with accrued vacation, gross income should be under $70,000. Probably another $5000 in interest/dividends in taxable. But the savers credit is based on AGI, which is after 401K, IRA, HSA. $18,000 + $11,000 + $4550 = $33550 adjustments, bringing AGI total to $41,450.

The cutoff for 2015 for savers credit is $61,000 so we should get *something*

(I don't know why this makes me so happy)
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Old 01-13-2015, 08:16 AM   #2
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I hadn't thought of a "savers credit" but I won't have an option in 2015. I get a substantial SERP payment that throws me immediately into the 33% tax bracket. Is the savers credit available without earned income?

I'm still in limbo on my last day. I don't have a clue when I'm going to no longer be "essential." We recently staffed up a large, new job. My experience was perfect for it. It will run for about 3 years so it's considered "job security" for what most people are expecting to be an O&G downturn. Several people have asked why I wasn't on it. I just smile and say I'm obviously not one of the "blessed." I don't want to have a long "retirement dance" while I'm still not sure when I'm leaving.
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Old 01-13-2015, 08:27 AM   #3
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If you pay over $300/$600 in foreign taxes in your taxable account on mutual funds that have foreign holdings if you are single/married, then you often can't get the full tax credit for paying them in regular retirement years if your tax rate is very low (below what the funds paid to foreign countries percentage-wise).

However, since you will pay plenty of taxes in 2015 then in 2016 you will be able to carry back any foreign taxes paid to 2015. You file a 1040x for your 2015 return in 2017 after you do your 2016 taxes.

I got an additional refund of over $1000 for doing this. My example: I retired in 2007, similar situation to you. My 2008 income taxes were zero, since I only had capital gains and qualified dividend income. But I had over $1000 in foreign taxes paid on mutual funds in 2008. In early 2009, after doing my 2008 income taxes, I filed a 1040x for my 2007 taxes carrying back 2008 foreign tax paid to 2007. I got the full $1000 refunded to me.
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Old 01-13-2015, 08:36 AM   #4
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I need to read up on the savers credit! I plan on bailing after maxing the stock purchase and 401K+catchup. No Roths for us this year.

Only advantage I think I lose, besides working for some months, over bailing Jan. 1st is that the income probably pushes us out of the ACA subsidies but I'm still checking on that.
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Old 01-13-2015, 11:45 AM   #5
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You guys just keep posting so I can learn more about this type of situation. Will be in it in the next 35 days. Need to learn all I can. :-)
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Tax planning for first year retirement
Old 01-13-2015, 12:31 PM   #6
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Tax planning for first year retirement

Quote:
Originally Posted by kimcdougc View Post
You guys just keep posting so I can learn more about this type of situation. Will be in it in the next 35 days. Need to learn all I can. :-)

Yes. I am not eligible but I had never even learned of this credit before. I pointed the nice lady who cuts my hair to the PPACA question/answer thread a while back (at the time, she had no health insurance) and she was very grateful - good information here.
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Old 01-13-2015, 12:34 PM   #7
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Originally Posted by steelyman View Post
Yes. I am not eligible but I had never even learned of this credit before. I pointed the nice lady who cuts my hair to the PPACA question/answer thread a while back and she was very grateful - good information here.
When you get down to the bottom of the income trough there are some tasty tax credit chunks mixed in with the slop. Easy to overlook though.
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