Are You Missing Out on These 3 Common Tax Strategies for Retirees?

There are a few tax strategies for retirees that could increase your refund or at least help to trim the tax you owe.

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For most people, the income tax filing season comes and goes as a necessary evil each year. It is known as a time for gathering documents, uploading files, finding receipts and fearfully awaiting the final verdict. There are a few tax strategies for retirees that might be sitting right under your nose and could increase your refund or at least help to trim the tax you owe.

  1. Qualified Charitable Distributions (QCDs) – In 2019, the standard deduction for a married couple over age 65 is now $27,000 ($13,850 for singles), which may limit the deductibility of charitable gifts. However, those over age 70.5 can make gifts directly to charity from an IRA and lower the amount of taxable income paid on their IRA withdrawals.
  2. Gifting Appreciated Securities to a Donor Advised Fund (DAF) – This opportunity is also due to the higher standard deduction. Small gifts made to charity may not be enough to itemize your deductions anymore, but a larger, one-time gift to get you over the standard deduction may be beneficial. The contribution to a DAF not only avoids tax on the appreciated securities, but should also qualify as a tax-deductible contribution. With a Donor Advised Fund, you can hold the funds in the account and still give just the smaller amounts you want to give each year to charity.
  3. Convert IRA Assets to Roth IRA Due to Lower Tax Brackets – The lower 4 tax brackets have been extended as follows for 2018–2025, compared to 2017 for Married Filing Jointly (MFJ) and Single (S):
    • 10% – up to $19,400 (MFJ), was 10% up to $18,650 $9,700 (S), was $9,325
    • 12% – up to $78,950 (MFJ), was 15% up to $75,900 $39,475 (S), was $37,950
    • 22% – up to $168,400 (MFJ), was 25% up to $153,100 $84,200 (S), was $91,900
    • 24% – up to $321,450 (MFJ), was 28% up to $233,350 $160,725 (S), was $191,650

    You need years of growth to make a Roth IRA Conversion worthwhile, due to the cost of paying taxes in advance, but there are certainly more opportunities to convert now at lower rates than in years past.

It is also extremely important to work with someone who is knowledgeable in these areas to determine the best strategies for your particular situation. As a team of trusted advisers who focuses on all aspects of retirement planning—from tax strategies to wealth management—we help our clients navigate questions and concerns to create the plan that’s best for them.

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