Need some Tax suggestions

[KB]

I would appreciate any tax suggestions for my situation on investing or filing income taxes for 2006.

Beginning 2006, I will have no earned income; my income will be from gifting and interest/dividend income. In 2007 and 2009 I will be adding pension income assuming the pensions are still intact at that time. I don’t know if pension income is earned income, maybe it isn’t and there will be no tax changes at that time.

I’m losing my children as deductions in 2006 so will not be filing Head of Household. I own my home, so would mainlyy have property tax, charity donations and possibly medical insurance and health/dental cost deductions.

I have a Roth IRA to which I will not be able to add - VG Target 1015.

I have a Rollover IRA which is invested in VG Admiral Wellesley. Is there a better place to put the money in my situation? I can look into converting this into a Roth IRA. I also have I bonds and CDs.

I just wondered if anyone had any tax considerations/suggestions for my situation. I’ll be investing about 30 - 40K each year and am not sure what the best vehicle would be in my tax situation. I’m 53 BTW and live in California.

Thanks in advance

 

[brewer12345]

Others can comment, but I would probably harvest the 15% bracket as much as possible before the pension income kicks in. As I understand it, pension income is usually "ordinary" income, so it would use up 15% bracket availability.

 

[KB]

Thanks Brewer.

 

[maddythebeagle]

So your pension income is coming in at unequal distributions? or are you getting 2 different pensions? If your income is higher one year, you can lump your deductions (state and property taxes) and double up on one year.

I think some folks here talk about starting a small business for tax deductions.

 

[KB]

2 different pensions.

I stacked a bunch of deductions this year since I worked 6 months of the year and had earned income.

I did take a short class on starting a business, but don't really want to work. I'll probably sell some stuff on ebay, but nothing more complicated than that.

 

[Mr._johngalt]

2 different pensions.

I stacked a bunch of deductions this year since I worked 6 months of the year and had earned income.

I did take a short class on starting a business, but don't really want to work.  I'll probably sell some stuff on ebay, but nothing more complicated than that.

I think the eBay idea is a real good one. I don't do it myself
because even that is too much like work to suit me. Also,
re" I did take a short class on starting a business" .................. Without knowing
anything else, I would advise anyone who said that not to do it.
You made the right decision.

JG

 

[Martha]

KB, one thing I was reminded of in "tax school" was that you might be able to claim head of household status even if you child is no longer a dependent. And, even if your child is over 18, the child may still be a dependent if in school as a full time student and you provide more than 1/2 of their support. Here is the publication on head of household status and what is necessary to claim someone as a dependent: http://www.irs.gov/publications/p501/

 

[KB]

Thanks Martha....I'll check that out.

My oldest son is joining the Army in early 2006, but my youngest might help me qualify.