Is This Tax Idea Crazy/Possible?

[gerntz]

I was also bunching my deductions every 2nd year... until I RE and now do not owe any federal taxes

If you're going to have RMD's and/or SS benefits in the future that will significantly increase your income, paying zero Fed tax now likely isn't a good idea.

 

[Texas Proud]

If you're going to have RMD's and/or SS benefits in the future that will significantly increase your income, paying zero Fed tax now likely isn't a good idea.

For me it is a two edge sword... I do not pay any federal tax, but I do get an ACA subsidy... ANY extra income reduces that at around 10% of the income (really a bit less)...

I am making a decision right now that maximizes my current refund vs a potential tax issue when I am older... IOW, money in my pocket today is worth more to me than money in my pocket 10 or more years from now...


Heck, I even have problems selling funds since I will get a cap gain that reduces my credit... so I have to manage carefully now...

 

[Jimbo125]

Under Section 461, the timing rules for deductions incurred by a cash basis taxpayer are straightforward: pay the expense, and it's generally deductible. Unless of course --barring the exception provided by the 12-month rule -- the payment creates a prepaid asset.
The prepayment of $50K in State tax creates a prepaid asset, therefore it is not deductible.

JLB, CPA