Tax Tips – Keep it Under $250,000

taxesIf only this was a problem for us!! Aside from two very good years when things went extremely well flipping foreclosures, we’ve never come close to having an Adjusted Gross Income (AGI) over $250,000. And I can’t imagine we ever will again.

So, I don’t foresee us getting hit with any of the new tax hikes. The tax rate for the highest earners has increased from 35% to 39.6% There’s the Additional Medicare Tax of 0.9%. There’s the Net Investment Income Tax. There’s a limit on itemized deductions. And, personal exemptions went up – but not for couples with AGIs of $300,000 or more.

No – although I’d love to be making big money, we’re more concerned with paying as little in taxes as legally possible. And it will become even more of a focus in the future. Now is a good time to start considering how things might look.

In about 3-4 years:

– we probably won’t be claiming any dependents. This past year, our dependents went from three to two.

– we may have started to sell our rentals. We haven’t really got an exit strategy for this, yet, except that we don’t plan to sell more than one in any calendar year. I’m pretty sure we’ll hold on to most of them for awhile. We’ll probably sell one when the current tenant leaves. This property, a townhome, is one we intended to sell, not rent, when we initially acquired it.

– once we stop flipping properties, for good, we will probably stop filing corporate returns. Our tax situation should be simple enough that I can do our taxes instead of paying a tax accountant to do them. We’ll see.

In about 5-7 years:

– Jay will have retired and will have taken his pension as a lump sum. He may or, may not, take another job. I need to research the tax rules surrounding taking his pension as a lump sum. We will make sure his retirement date is as tax-friendly for us, as possible.

– both Jay and I will have reached 59 1/2 and will be able to withdraw from our respective 401Ks without paying penalties. Any distributions we take will be taxable, so we’ll be keeping an eye on how much we take out.

– we will probably have moved into a smaller home and will, hopefully, not have a mortgage anymore. Without paying mortgage interest, and with lower property taxes, it’s likely that we won’t be itemizing our deductions anymore.

– taking the standard deduction means that our charitable donations will no longer be tax deductible. Also, once Jay retires we won’t be able to take advantage of his company match program. So, we should maximize our cash donations now. In the future, our giving will, more likely, be in the form of volunteering.

– we will be close to 62, the earliest age at which we can take Social Security. My guess is that I’ll start collecting, but Jay will put it off until 67, our “full retirement” age. However, we’ll definitely research our alternatives before making any decisions.

2 thoughts on “Tax Tips – Keep it Under $250,000

  1. Pingback: Time For a Part Time Job? | How I Saved Money Today (and other stuff I think about)

  2. Pingback: Multiple Streams of Income | How I Saved Money Today (and other stuff I think about)

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