Savers retirement tax credit, make 39500 or less MFJ get 50% tax credit up to 1000 per person. Put in 4000 MFJ get 2000 in tax credits. Don’t forget about EITC tax credits also. Important to keep income low if kids are in college. FAFSA aid which is gradually changing over the next 2 years
Very helpful video. 2 questions. How do you monitor your AGI during the year, and as far as the HSA contribution goes can that be made from a traditional IRA to reduce your AGI. I have a qualified High deductible insurance plan for 2022.
There is no easy way to monitor your AGI during the year other than being very aware of every source of income you have. Wages are easy to forecast, bank interest is fairly easy to predict, dividends aren't too difficult to track throughout the year, Social Security is known with certainty, as are pensions. But some of the things are more variable, like IRA distributions (but you can at least completely control how much you do or don't distribute). And if you're self-employed, that could be fairly variable. As can rental property income. Another big variable is capital gain distributions in mutual funds held in normal taxable accounts. So it really all depends on your particular sources of income. Yes, you can potentially do a once-in-a-lifetime IRA-to-HSA transfer called a "Qualified HSA Funding Distribution." But that won't get you a tax break on your AGI as the IRA will already be pre-tax money in the first place, so you can't double-dip and get a tax break for making that HSA contribution.
Hi Andy! I don't think you mentioned this, but how about switching from Roth 401k contributions to Traditional 401k in the last month or two of the taxable year? For example... Bob has been planning to max out his employer sponsored plan as a Roth. Bob also made a direct Roth IRA contribution earlier in the year at the maximum level. Bob then realizes in September that he may end up going a bit over the allowable MAGI for making that Roth contribution, but if his AGI was just a bit lower he'd be within the allowable threshold (thus the last minute unforeseen need to lower his AGI). Switching to Traditional might be an easy fix that could probably be implemented as late as December.
Yes, great point. If the reduction in taxable wages is enough to get Bob under the Roth IRA contribution MAGI limit, that could work. But that will take some planning ahead of time, as it typically takes a pay cycle or two for 401(k) administrators to process such a request.
@@RetirementPlanningEducation You are right, Andy. Trying to do the switch in early Dec would probably be too late, because of the admin issues. I'm a federal employee so for me it would be the TSP, and it's easy to just log on and change the contribution but still I'd need to get it in by mid/late November. How often does it happen that somebody makes a direct Roth IRA contribution (early in the year) and then later in the year realizes his likely MAGI was going to be too close for comfort? That almost happened to me a couple years ago, and I hadn't learned about Back Door Roths yet as a tool to prevent that issue from being a problem. PS. I have been directing people I know to your videos. I have been impressed not only with the quality and quantity of your stuff, but also by the fact that you do it without trying to push people to give you money. That's pretty awesome.
@@johns4386 Excess Roth IRA contributions happen more than you'd probably think. For exactly the reason you mentioned. Thanks for the recommendations! I greatly appreciate it!
Awesome video but I'm in a bind. This tax advisor (well known company) said I could take a hefty traditional IRS distrib with no impact on my premium tax credit. She was wrong since it's based on AGI and not on net. Can I just put most of the money back into the trad IRA to lower my AGI (example 20000 out then 10000 back in)? Am I now limited to the yearly contribution, or not since I am within 60 days? Thank you.😨
Yes, you can do an "indirect" rollover whereby you take the gross amount distributed and put it back into your traditional IRA within 60 days of when you took receipt of the original distribution. There are a few things to keep in mind though: 1) if you did another indirect rollover within the last 12 months, you can't do another one until 12 months has passed and 2) any amount of the original distribution NOT put back will still be treated as a distribution. For example, if you did a $20,000 gross distribution and had $2,000 withheld for tax such that you netted $18,000 into your bank account, you will still be treated as having had $2,000 of distribution (and hence $2,000 of AGI) if you only put $18,000 back into your IRA. If you want to erase the distribution completely you need to cough up another $2,000 now so you can put all $20,000 back into the IRA. And then, all else equal, you will get the $2,000 that was originally withheld paid back to you when you file your tax return
Thank you for your prompt answer. So my AGI will not show the 20000 "extra" since I put it back (or most of it). I just wanted to make sure that my 1099R will not show the 20000 but the final distribution. Thank you, I'm grateful you care.
@@danielle-lu2dtyour 1099-R will still show that distribution. You have to manually reflect on your tax return that some of it was rolled back into an IRA (and hence not all of the distribution is to be included in AGI)
Hi, I am filling out a CSU application for college and it is asking me to input my Parents' adjusted gross income (AGI) for 2022 and my Parents' untaxed income and benefits for 2022. I know the AGI can be found on line 11 of the 1040 form on the 2022 Individual Tax Return, but I want to confirm where I can find the amount for the untaxed income and benefits? Is it line 2a where it says “Tax-exempt interest” or is it line 2b where it says “Taxable interest”? Line 2a is blank, but line 2b has an amount. Which one would I put? Thank you.
Sorry, but I'm not sure what their definition of "untaxed income and benefits" is. You'd have to ask them. It could potentially include items that aren't on their tax return (like certain employee benefits they receive, gifts received from others, etc.)
Another source of untaxed income could be Veterans disability pay which is non-taxable and not reflected on the 1040. Additionally if active duty military some of the overseas & special duty pay as well as housing allowance is untaxed income.
Is there any way to benefit from investment losses in a retirement account ( ira or Roth IRA), or is it only applicable to sales in taxable brokerage accounts?
Yes, traditional pre-tax 401(k) contributions will reduce your AGI from what it otherwise would have been. But they need to be done before December 31st. You can’t do them for the tax year after December 31 and before you file your tax return early the next year, like you can with IRAs.
I made maximum HSA contribution from my employer plan in 2021. I also got married in Sept, and my spouse did not make HSA contributions. Can I make a spousal HSA contribution as HSA adjustment; if I have high deductible medical plan, but my spouse doesn't have a high deductible medical plan?
If the lower AGI not only lowers your taxable income but also helps get you other tax credits such as ACA credits or stimulus credits. Then the present savings can definitely add up
You are assuming the same inflation-adjusted income now as later. For example, if you are making $1M a year now, your current bracket will likely be higher than if you retire and make $50K/year even though tax rates will generally rise. Then your traditional IRA would be beneficial.
@@DissoMaster Correct, I'm largely assuming the person isn't in peak earning years now. Someone I work with just retired last year, and had only about $20k of wages for the year (enough to make an IRA contribution for him and his wife). And he and his wife were on ACA insurance. And they're MAGI inclusive of the AGI reduction for the IRA contributions got them into the tight income range where they'd get some of the third round of stimulus credits that they wouldn't have gotten if they didn't make the IRA contributions. So for them, it made a lot of sense as the present-day tax savings of the IRA contribution were much more than simply their marginal tax rate on the $14k.
@@anneraso5621 This will detail the MAGI calculation for ACA. As for how to lower it, virtually anything that lowers your AGI will lower your MAGI. You'd have to go line by line through your tax return to see which items feed into your AGI. And then see which things could possibly be changed to reduced it
Clear, precise, and very useful. Thank you!
Savers retirement tax credit, make 39500 or less MFJ get 50% tax credit up to 1000 per person. Put in 4000 MFJ get 2000 in tax credits.
Don’t forget about EITC tax credits also.
Important to keep income low if kids are in college. FAFSA aid which is gradually changing over the next 2 years
Great points. AGI affects a lot more than just marginal tax brackets!
Very clear! Thank you!
Very helpful video. 2 questions. How do you monitor your AGI during the year, and as far as the HSA contribution goes can that be made from a traditional IRA to reduce your AGI. I have a qualified High deductible insurance plan for 2022.
There is no easy way to monitor your AGI during the year other than being very aware of every source of income you have. Wages are easy to forecast, bank interest is fairly easy to predict, dividends aren't too difficult to track throughout the year, Social Security is known with certainty, as are pensions. But some of the things are more variable, like IRA distributions (but you can at least completely control how much you do or don't distribute). And if you're self-employed, that could be fairly variable. As can rental property income. Another big variable is capital gain distributions in mutual funds held in normal taxable accounts. So it really all depends on your particular sources of income.
Yes, you can potentially do a once-in-a-lifetime IRA-to-HSA transfer called a "Qualified HSA Funding Distribution." But that won't get you a tax break on your AGI as the IRA will already be pre-tax money in the first place, so you can't double-dip and get a tax break for making that HSA contribution.
Hi Andy! I don't think you mentioned this, but how about switching from Roth 401k contributions to Traditional 401k in the last month or two of the taxable year?
For example... Bob has been planning to max out his employer sponsored plan as a Roth. Bob also made a direct Roth IRA contribution earlier in the year at the maximum level. Bob then realizes in September that he may end up going a bit over the allowable MAGI for making that Roth contribution, but if his AGI was just a bit lower he'd be within the allowable threshold (thus the last minute unforeseen need to lower his AGI). Switching to Traditional might be an easy fix that could probably be implemented as late as December.
Yes, great point. If the reduction in taxable wages is enough to get Bob under the Roth IRA contribution MAGI limit, that could work. But that will take some planning ahead of time, as it typically takes a pay cycle or two for 401(k) administrators to process such a request.
@@RetirementPlanningEducation You are right, Andy. Trying to do the switch in early Dec would probably be too late, because of the admin issues. I'm a federal employee so for me it would be the TSP, and it's easy to just log on and change the contribution but still I'd need to get it in by mid/late November. How often does it happen that somebody makes a direct Roth IRA contribution (early in the year) and then later in the year realizes his likely MAGI was going to be too close for comfort? That almost happened to me a couple years ago, and I hadn't learned about Back Door Roths yet as a tool to prevent that issue from being a problem.
PS. I have been directing people I know to your videos. I have been impressed not only with the quality and quantity of your stuff, but also by the fact that you do it without trying to push people to give you money. That's pretty awesome.
@@johns4386 Excess Roth IRA contributions happen more than you'd probably think. For exactly the reason you mentioned.
Thanks for the recommendations! I greatly appreciate it!
Awesome video but I'm in a bind. This tax advisor (well known company) said I could take a hefty traditional IRS distrib with no impact on my premium tax credit. She was wrong since it's based on AGI and not on net. Can I just put most of the money back into the trad IRA to lower my AGI (example 20000 out then 10000 back in)? Am I now limited to the yearly contribution, or not since I am within 60 days? Thank you.😨
problem is I paid 10% taxes on that 20M
Yes, you can do an "indirect" rollover whereby you take the gross amount distributed and put it back into your traditional IRA within 60 days of when you took receipt of the original distribution. There are a few things to keep in mind though: 1) if you did another indirect rollover within the last 12 months, you can't do another one until 12 months has passed and 2) any amount of the original distribution NOT put back will still be treated as a distribution. For example, if you did a $20,000 gross distribution and had $2,000 withheld for tax such that you netted $18,000 into your bank account, you will still be treated as having had $2,000 of distribution (and hence $2,000 of AGI) if you only put $18,000 back into your IRA. If you want to erase the distribution completely you need to cough up another $2,000 now so you can put all $20,000 back into the IRA. And then, all else equal, you will get the $2,000 that was originally withheld paid back to you when you file your tax return
Thank you for your prompt answer. So my AGI will not show the 20000 "extra" since I put it back (or most of it). I just wanted to make sure that my 1099R will not show the 20000 but the final distribution. Thank you, I'm grateful you care.
@@danielle-lu2dtyour 1099-R will still show that distribution. You have to manually reflect on your tax return that some of it was rolled back into an IRA (and hence not all of the distribution is to be included in AGI)
Hi,
I am filling out a CSU application for college and it is asking me to input my Parents' adjusted gross income (AGI) for 2022 and my Parents' untaxed income and benefits for 2022. I know the AGI can be found on line 11 of the 1040 form on the 2022 Individual Tax Return, but I want to confirm where I can find the amount for the untaxed income and benefits? Is it line 2a where it says “Tax-exempt interest” or is it line 2b where it says “Taxable interest”? Line 2a is blank, but line 2b has an amount. Which one would I put?
Thank you.
Sorry, but I'm not sure what their definition of "untaxed income and benefits" is. You'd have to ask them. It could potentially include items that aren't on their tax return (like certain employee benefits they receive, gifts received from others, etc.)
Another source of untaxed income could be Veterans disability pay which is non-taxable and not reflected on the 1040. Additionally if active duty military some of the overseas & special duty pay as well as housing allowance is untaxed income.
Is there any way to benefit from investment losses in a retirement account ( ira or Roth IRA), or is it only applicable to sales in taxable brokerage accounts?
Only normal taxable accounts
How about 401k contributions?
Yes, traditional pre-tax 401(k) contributions will reduce your AGI from what it otherwise would have been. But they need to be done before December 31st. You can’t do them for the tax year after December 31 and before you file your tax return early the next year, like you can with IRAs.
I made maximum HSA contribution from my employer plan in 2021. I also got married in Sept, and my spouse did not make HSA contributions. Can I make a spousal HSA contribution as HSA adjustment; if I have high deductible medical plan, but my spouse doesn't have a high deductible medical plan?
Was your spouse on your plan at all? From September onward, perhaps?
Why would anyone make a traditional IRA donation now when taxes are at what is probably a life time low?
If the lower AGI not only lowers your taxable income but also helps get you other tax credits such as ACA credits or stimulus credits. Then the present savings can definitely add up
You are assuming the same inflation-adjusted income now as later. For example, if you are making $1M a year now, your current bracket will likely be higher than if you retire and make $50K/year even though tax rates will generally rise. Then your traditional IRA would be beneficial.
@@DissoMaster Correct, I'm largely assuming the person isn't in peak earning years now.
Someone I work with just retired last year, and had only about $20k of wages for the year (enough to make an IRA contribution for him and his wife). And he and his wife were on ACA insurance. And they're MAGI inclusive of the AGI reduction for the IRA contributions got them into the tight income range where they'd get some of the third round of stimulus credits that they wouldn't have gotten if they didn't make the IRA contributions. So for them, it made a lot of sense as the present-day tax savings of the IRA contribution were much more than simply their marginal tax rate on the $14k.
@@RetirementPlanningEducation How do they calculate MAGI for ACA? How do you lower it???
@@anneraso5621 This will detail the MAGI calculation for ACA. As for how to lower it, virtually anything that lowers your AGI will lower your MAGI. You'd have to go line by line through your tax return to see which items feed into your AGI. And then see which things could possibly be changed to reduced it
Workers comp is untaxable income.