Death and Taxes 2022

[IRQVET]

So my wife and elected to defer all stimulus payments/ child tax credits in 2021, and luckily we did, because our tax return was north of $13,000. However, my tax lady told me my annual income was only $600 shy of popping me into the next tax bracket.

I was incorrectly under the impression that my 10% I put into my TSP Roth would decrease my taxable income. I guess its only monies you put toward your regular TSP that reduce you taxable income per the IRS.

So with the new cola and my scheduled step increase this year, I'll have to jump from putting 5% into my regular TSP to 10-12%. But that will put me dangerously close to the $19,500 max cap as I'm nowhere close to the catch up age.

Figured it was worth mentioning, as I'm no tax or financial guru.

Is there any other ways to lower your taxable income (without itemizing) once you reach the annual salary v. max contribution ceiling? I've very against the idea of jumping from a 12% tax bracket to a 22% tax bracket if I can avoid it.

[bloobs]

So my wife and elected to defer all stimulus payments/ child tax credits in 2021, and luckily we did, because our tax return was north of $13,000. However, my tax lady told me my annual income was only $600 shy of popping me into the next tax bracket.

I was incorrectly under the impression that my 10% I put into my TSP Roth would decrease my taxable income. I guess its only monies you put toward your regular TSP that reduce you taxable income per the IRS.

So with the new cola and my scheduled step increase this year, I'll have to jump from putting 5% into my regular TSP to 10-12%. But that will put me dangerously close to the $19,500 max cap as I'm nowhere close to the catch up age.

Figured it was worth mentioning, as I'm no tax or financial guru.

Is there any other ways to lower your taxable income (without itemizing) once you reach the annual salary v. max contribution ceiling? I've very against the idea of jumping from a 12% tax bracket to a 22% tax bracket if I can avoid it.

How about your wife opening a traditional IRA and putting the extra contributions in there? That would work until you guys gross incomes exceed certain IRS thresholds. Ah, the pitfalls of joining the wealthiest 10%.

If I recall correctly, you also flip houses, right? If so, there is potentially a ton of business expenses with that activity that you can deduct--if you run it as a sole proprietor or S-corporation.

PS -- you're not really jumping from a 12 to 22% tax bracket. The only income that would get assessed at 22% is the extra money you made on top of previous years taxable incomes.

[stilljammi]

PS -- you're not really jumping from a 12 to 22% tax bracket. The only income that would get assessed at 22% is the extra money you made on top of previous years taxable incomes.

Exactly. We have a progressive federal income tax system. It's hardly worth twisting yourself into pretzels to avoid the few bucks that are at the higher rate.

[IRQVET]

Ahh, good to know. Wasn't aware of that, that makes me feel better.

As for the wife contributing to her 401K, she has not reentered the work force yet, she has been a stay-at-home mom for 6 years, and will continue to do that for another 5 years or so until the baby goes back to school. And no we are not flipping houses, not for a while anyway. We were doing that on the west coast, but when we moved to the east coast, we stopped. Not to say we won't do it again, just not in the near future. My house is only 1.5 years old, but it'll be paid off in 10 years. That's when I'll probably start doing that again, but in the next 2-3 years we plan on picking up a rental property or two.

[bloobs]

As for the wife contributing to her 401K, she has not reentered the work force yet...

I assumed that. There is what is colloquially referred to as a "spousal IRA" where the account is in her name but it is your earnings that goes in there.

https://www.investopedia.com/retirement ... ributions/

[jimmyk]

We ran into a similar situation and started a spousal IRA to keep out of the next bracket. May also consider going roth as you can get to the principal.

[wingchaser]

I (oftentimes) profess that a ROTH IRA is the only true instrument that is allowed to exist & accrue TAX-FREE. Maximizing yearly contributions, therein, is one (1) of the greatest gifts that one can bestow upon oneself…

Best of Luck (everyone) in all you choose to endeavor!!!

[IRQVET]

Does the TSP have a spousal IRA, or did you go elsewhere? Can’t imagine the spouse of a fed getting that . . .

[bloobs]

Does the TSP have a spousal IRA, or did you go elsewhere? Can’t imagine the spouse of a fed getting that . . .

practically all the big brokerages offer a traditional ira product that can be set up as a spousal ira.

[alpe9942]

So my wife and elected to defer all stimulus payments/ child tax credits in 2021, and luckily we did, because our tax return was north of $13,000. However, my tax lady told me my annual income was only $600 shy of popping me into the next tax bracket.

I was incorrectly under the impression that my 10% I put into my TSP Roth would decrease my taxable income. I guess its only monies you put toward your regular TSP that reduce you taxable income per the IRS.

So with the new cola and my scheduled step increase this year, I'll have to jump from putting 5% into my regular TSP to 10-12%. But that will put me dangerously close to the $19,500 max cap as I'm nowhere close to the catch up age.

Figured it was worth mentioning, as I'm no tax or financial guru.

Is there any other ways to lower your taxable income (without itemizing) once you reach the annual salary v. max contribution ceiling? I've very against the idea of jumping from a 12% tax bracket to a 22% tax bracket if I can avoid it.

The TSP limits for 2022 are now $20,500 for anyone <50 yrs of age and $27,000 for anyone 50 yrs of age or older.

[Scarfinger]

I (oftentimes) profess that a ROTH IRA is the only true instrument that is allowed to exist & accrue TAX-FREE. Maximizing yearly contributions, therein, is one (1) of the greatest gifts that one can bestow upon oneself…

Best of Luck (everyone) in all you choose to endeavor!!!

Not only for oneself... I opened a custodial ROTH for my 13 year old nephew.