Mindset vs Tax Bracket

[SunnyOne]

Until retirement this year, over the past few decades, my mindset has been oriented toward lowering taxable income, availing myself of all strategies, to the max extent possible. I was in a relatively high bracket with few deductions.

Flip a switch suddenly after all these years and now I will find myself in 2022 in the near 0% bracket.

It occurs to me I need to learn how to think differently, instead of ways to reduce taxable income, I should start to think of credits and programs or whatever, based on low income - one example, the savers credit.

What else might I not be aware of as a new low income tax payer? thanks

I do have health insurance through my prior employer, so ACA is not an issue.

 

[disneysteve]

What else might I not be aware of as a new low income tax payer? thanks

My mom gets discounts on her utility and phone bills.



I know she fills out a bunch of paperwork each year which I think is far more trouble than it's worth in her case but she insists on doing it. She doesn't need the discount by any means.

 

[RetiredAndLovingIt]

Home weatherization program can cut down on your bills and the utility companies will update some older water heaters, a/c units and heating systems, at least they do in California if more than 10 years old.

Florida Weatherization Assistance Program - FloridaJobs.org

 

[RunningBum]

Consider Roth conversions, especially if you will have large RMDs. There may be some credits and other factors to favor keeping income small some years, but basically keeping income level over the rest of your lifetime is a pretty good plan. Limiting the amount of SS that gets taxed might be a reason to take more income now (thru conversions, most likely) than once you start SS.

 

[mrfeh]

Consider Roth conversions

+1

 

[Jerry1]

Agree - ROTH conversions. Get as much out of your pre tax accounts as possible at the lower tax brackets. Especially for the next few years while the rates are still low. Who knows what will happen when the current tax legislation expires.

 

[SunnyOne]

My bracket for 2021 will be 22%.

Is this something I should do before the end of next week ? (12/31/2021)

Thanks

 

[Car-Guy]

As a retired person with sizeable pretax accounts (401k/IRA's) my tax bracket mindset has been to do what I can to stay below the IRMAA penalty brackets. I finally made it for 2022.

 

[joesxm3]

In 2022 if your income is in the 15% bracket you can sell appreciated stocks and buy them right back. The realized ltcg is taxed at 0% in this range. Balance that against ROTH conversions. Are you going to be getting affordable care act insurance? That might affect your strategy.

 

[USGrant1962]

I ran into that when I semi-retired. I found out I was potentially eligible for AOTC and Roth contributions as well as other credits that don't specifically apply to me. None of which applies much above $200K MFJ. At that level you are "rich" apparently. Studying this post by Gumby might reveal some benefits available to you.

https://www.early-retirement.org/fo...-trigger-income-levels-for-2022-a-111659.html

 

[SunnyOne]

I get health insurance in retirement through my prior employer (fed govt) and my bracket for 2021 is 22%....
trying to quickly understand conversions to see if I need to do anything quickly now for 2021. I do have very large balances in my TIRA and 401K (TSP) accounts. Thanks

 

[mrfeh]

In 2022 if your income is in the 15% bracket you can sell appreciated stocks and buy them right back. The realized ltcg is taxed at 0% in this range. Balance that against ROTH conversions. Are you going to be getting affordable care act insurance? That might affect your strategy.

?

Are you saying they've suspended the wash sale rule? If so, that is news to me...

 

[Montecfo]

-use your zero pct LTCG bracket.
-consider Roth conversions

 

[COcheesehead]

?

Are you saying they've suspended the wash sale rule? If so, that is news to me...

There is no wash when there is a gain.

 

[RunningBum]

My bracket for 2021 will be 22%.

Is this something I should do before the end of next week ? (12/31/2021)

Thanks

Probably not, unless you think your tax bracket in later years will be higher than that.

 

[mrfeh]

There is no wash when there is a gain.

Ah, yes. I missed appreciated in your comment.

aka tax gain harvesting

 

[Midpack]

Consider Roth conversions, especially if you will have large RMDs. There may be some credits and other factors to favor keeping income small some years, but basically keeping income level over the rest of your lifetime is a pretty good plan. Limiting the amount of SS that gets taxed might be a reason to take more income now (thru conversions, most likely) than once you start SS.

My bracket for 2021 will be 22%.

Is this something I should do before the end of next week ? (12/31/2021)

Probably not, unless you think your tax bracket in later years will be higher than that.

+1, summarizes my suggestion as well. It’s all about lifetime tax planning IME, you’re the only one (OP) who can make that determination.

 

[skyking1]

Here is something we are hoping to get done in time for the 2023 year. The new home will have a geothermal heat pump, and there is a nice tax credit that expires in 2023. This is a link to a geothermal retailer that explains it well.
https://dandelionenergy.com/federal-geothermal-tax-credit

There are many categories of energy improvements covered by that tax credit. Consider a home improvement that will wipe out your projected tax bill, and enjoy!