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Running Up the Tab

Michael Perry  |  Dec 9, 2023

A FEW DAYS AGO, I RAN the numbers on our likely 2023 taxes, and reached two conclusions: We have a small refund coming—and we should find a way to pay more taxes.
How can both be true? I project that our 2023 taxable income will be well below $190,750, which is the top of the 22% tax bracket for those married filing jointly. Getting taxed at 22% strikes me as a good deal, given the likelihood that we’ll be taxed at an even higher rate later in retirement.

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Location, Location

Howard Rohleder  |  Oct 12, 2023

WANT TO IMPROVE YOUR portfolio’s long-run performance? You could boost your stock allocation—something I wrote about last year—or cut your investment costs. But don’t overlook another key strategy: thinking carefully about which accounts you use to hold your various investments, or what financial experts call “asset location.”
My wife and I have taxable accounts, Roth IRAs, traditional IRAs and a health savings account. Earnings in each account get different tax treatment both now and in the future.

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Roll This Way

Richard Connor  |  Aug 28, 2023

I THOUGHT I HAD a pretty good handle on health savings accounts, or HSAs. My wife and I contributed to HSAs over the decade before we retired. The money we accumulated has come in handy in the early years of retirement. I’ve also written several articles extolling their virtues.
But I recently learned that we missed an opportunity to further fund these accounts, while simultaneously reducing future required minimum distributions. The trick is to do a rollover from an IRA to an HSA.

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Getting Squeezed

Marjorie Kondrack  |  Aug 14, 2023

MY CONTENTION: ONE of the most egregious parts of the tax code is the stealth tax on Social Security benefits.
To be sure, if your income is low enough, your benefits won’t be taxed. But around 56% of retired Americans pay taxes on up to 85% of their Social Security benefits. And the number grows each year. Incomes rise, if only because of inflation-driven increases, and yet the thresholds for taxing benefits have never been adjusted for inflation or wage growth.

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Piling On the Pain

Adam M. Grossman  |  Aug 6, 2023

LOOK UP THE WORD “nit” in the dictionary and you’ll find a few definitions—none of them particularly positive. Perhaps, then, it’s no surprise that the tax commonly known as NIIT can be a bit of an annoyance.
NIIT is short for net investment income tax. It originated back in 2013 to help pay for the new health care law. The net investment income tax rate is relatively innocuous at 3.8%, and it’s already been on the books for 10 years,

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What Did We Pay?

Aaron Brask  |  Jul 14, 2023

WHAT’S THE COST BASIS of the stocks you own? It’s hardly surprising that this information occasionally gets lost, especially if we’re talking about shares acquired years or even decades ago. In fact, you may never have known the cost basis if you received the shares as a gift and, to make things even more confusing, the IRS has quirky rules for gifted shares.
Whatever the reason, many people are missing cost basis information—a significant problem because cost basis directly affects the taxes you may have to pay when selling investments held in a regular taxable account.

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A Late Save

Richard Connor  |  May 26, 2023

MANY RETIREMENT savers fund tax-deferred accounts—with good reason: The money we contribute pre-tax to an IRA or 401(k) reduces our taxable income, plus that money grows tax-deferred until withdrawn.
But there are two lesser-known benefits that are worth keeping in mind. First, with IRAs and solo 401(k)s, you can contribute for last year right up until the tax-filing deadline in April of the following year. That means you can calculate your tax bill, make an IRA contribution that’s credited to last year—and voila—cut the tab you owe Uncle Sam.

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Exposing Themselves

Richard Connor  |  May 19, 2023

RICHARD NIXON IS best known for the infamous Watergate scandal. But how many of us remember that, prior to Watergate, he got caught up in another scandal over a suspect tax deduction?
In 1969, Nixon donated more than 1,000 boxes of his official papers to his presidential library and attempted to claim a $576,000 charitable deduction. This caused an uproar, and served to start turning much of the nation against the president.
Congress got involved,

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That 28,000,000% Tax

John Yeigh  |  Apr 17, 2023

IF YOU’RE IN YOUR 60s or older and making sizable Roth conversions, it isn’t just income taxes that you need to worry about. You may also trigger much higher Medicare Part B and Part D premiums.
We’re talking here about those Medicare surcharges known as IRMAA, short for income-related monthly adjustment amount. These surcharges are over and above 2023’s standard $1,979 per person Medicare premium, and they’re based on income from two years earlier.

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Taxing Pastimes

Richard Connor  |  Apr 10, 2023

THIS IS MY FIFTH year providing income-tax preparation as part of the IRS’s Volunteer Income Tax Assistance program. This year, my colleagues and I have seen something new. We’ve had numerous retired taxpayers who have received IRS Form 1099-K for the sale of personal property. They’d never received one before and found it confusing.
What triggered these 1099-Ks? Many retirees find ways to supplement their income—including selling items on the internet. This is the modern version of yard sales and flea markets.

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When Free Isn’t Free

Richard Quinn  |  Feb 24, 2023

DO A QUICK REVIEW of Twitter and other social media sites, and you’ll find extensive use of the word “free.” The dictionary defines free as “without cost or payment.”

College, health care, child care, preschool, even housing are often mentioned in connection with “free.” The actual cost of “free” may not be what it seems. Free in this context typically means shifting the cost from one person to another, or redirecting money to some favored purpose.

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What’s in It for Me?

Adam M. Grossman  |  Feb 12, 2023

IN THE WANING DAYS of 2019, Congress passed the SECURE Act, a law that delivered a mixed bag of changes for retirement savers. Well, Congress has been busy again. At the tail end of 2022, a follow-up law—known as SECURE 2.0—was signed into law.
The good news: There’s a whole lot included in this new law. The bad news? There’s a whole lot included in this new law. SECURE 2.0 presents a number of new planning opportunities but,

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Profiting From Losses

Michael Perry  |  Feb 10, 2023

WE TRIMMED THE TAXES we owed on investment gains in 2021 by using losses we’d realized during 2020’s stock market swoon. Now, 2022’s market decline has allowed us to repeat this process, once again offsetting capital gains with tax losses that we’d earlier harvested.
My wife and I haven’t just saved on taxes, however. The sales have also allowed us to reposition our taxable portfolio away from active management and toward more of an indexing bent.

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Revisiting My Results

Richard Connor  |  Feb 3, 2023

I ENJOY WRITING for HumbleDollar—but I often feel I get more from the thoughtful reader comments than whatever insights I provided. For instance, in a recent article, I discussed some year-end financial decisions I was considering. Two readers made comments that caused me to review my decisions, while also delivering a few dollars’ worth of humility.
The first comment identified an error in my spreadsheet analysis. I noted that my marginal New Jersey state income-tax rate was 8.97%.

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What Gets Taxed

Richard Connor  |  Jan 23, 2023

INCOME SHOULD BE ONE of the simplest concepts in financial planning—and yet it turns out to be one of the most confusing, thanks to the multiple ways it’s calculated depending upon whether it applies to income taxes, Social Security and so on. My goal today: Help you sort out income’s shifting definition across the U.S. tax code.
Gross income. This is the granddaddy—income from all sources, before almost any taxes or deductions.

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