Lower taxable income means lower taxes. Sound simple, eh? But how does one lower their yearly taxable income, and why?
How - 1) Delay bonuses; 2) if Self Employed delay billings; 3) maximize retirement savings; 4) take Capital Losses to offset any gains for the year. (just a small sample)
Why - 1) Lower Tax bracket; 2) Lower or no unearned income surtax (3.8%); 3) Lower or no Medicare Tax (.9%); 4) Enable Credits; 5) Deductible IRA contributions (under certain circumstances); 6) Allows deduction of medical expenses (lowers threshhold). (just a small sample)
Make Sure to Withdraw RMD from IRA
Once you reach 70 1/2, you need to start withdrawing a minimum amount from your regular IRA, based on the IRS RMD tables. If you fail to do so the penalty can be very steep. The amount is based on the prior year's closing balance. Ask your accountant or financial advisor to determine the amount for you or visit the IRS website (irs.gov).
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Itemized Deductions
There are certain startegies that can increase your itemized deductions so they are higher than the Standard Deduction. These include: Bundle Charitable Deduction; Pay for Medical expenses early if it gets you over the threshhold; If your SALT is under $10,000 consider prepaying RE Tax; and more....
