How to Minimize the Most Important Number on Your Tax Return [Part 2]

You are receiving this email because you signed up to receive Bob Carlson's free e-letter Retirement Watch Weekly, or you purchased a product or service from its publisher, Eagle Financial Publications. [Carlson's Retirement Watch Weekly] [Retirement Reports](www.retirementwatch.com/retirement-resources/) [Retirement Articles](www.retirementwatch.com/retirement-articles/) Brought to you by Eagle Financial Publications How to Minimize the Most Important Number on Your Tax Return [Part 2] by Bob Carlson Editor, [Retirement Watch]( 08/20/2023 SPONSORED [Can this A.I. Algorithm Save Your Retirement?]( [image]( A.I. is an absolute game changing technology…like going from a rotary phone to a smartphone…Like going from dialup to 5G. Now, imagine you could apply this to the stock market. What if you could ask an A.I. program what price Google stock is going to be next month… Or how much the price of gold is going up or down… And what if it could predict those outcomes with astonishing accuracy? One of the world’s leading financial tech companies just launched a program recently that does exactly this. [Click here to learn more.]( [CLICK HERE...]( Fellow Investor, [Bob Carlson]In last week’s edition of Retirement Watch Weekly, I shared my first three strategies for how minimize your adjusted gross income (AGI). Today let's go through six more such strategies... Minimize Your Tax Return's Most Important Number in Retirement: Strategy #4: Be charitable with your IRA. When you’re making charitable contributions each year and are at least age 70½, make those contributions through your traditional IRA. In 2015, Congress made the qualified charitable distribution exclusion (QCD) permanent. After age 70½, when money is transferred directly from your IRA to a charity designated by you, the distribution isn’t included in your gross income (or your AGI). In addition, the distribution counts toward your RMD, if you’re required to take one that year. You don’t receive a deduction for the contribution. But the QCD stays out of your AGI, reducing income taxes and the Stealth Taxes. It’s probably the best way for someone age 70½ or older to make charitable contributions. Minimize Your Tax Return's Most Important Number in Retirement: Strategy #5: Manage capital gains. Long-term capital gains have a maximum 20% income tax rate, and most retirees pay a lower rate. Many pay a 0% rate on long-term gains. But net capital gains increase AGI. So, while long-term capital gains face a favorable tax rate, taking a lot of gains can trigger Stealth Taxes, effectively increasing the tax rate on capital gains. That’s why you need to be careful about taking long-term capital gains. When taking a gain in a taxable account is the right investment move, look for losses you can take to offset it. Or, if it’s late in the year, consider taking part of the gain now and the rest in a few months when you’re in a different taxable year. When you need cash and have a choice of its source, consider a tax-free source such as a Roth IRA or an HSA before selling assets for capital gains. Also, take a close look at your mutual funds. A fund that invests well but generates a lot of taxable distributions each year could be giving you a lower after-tax return than a fund with the same, or even a slightly lower, return but much lower distributions. Minimize Your Tax Return's Most Important Number in Retirement: Strategy #6: The retirement business. A retirement business can generate several tax benefits. First, if the business has tax losses from time to time, the losses reduce gross income and thereby reduce AGI. To deduct losses, it must be a real business from which you are trying to generate a profit. You must operate it in a businesslike manner. You also must materially participate; you can’t be a passive investor who lets others run it if you want to deduct losses. Second, self-employed individuals can deduct their health insurance premiums from gross income, reducing AGI. When you have family coverage you can deduct the full premium. SPONSORED [Are You or Your Children Dangerously Underinsured?]( [image]( While no one likes to think about dying and the consequences, we must remember that our family and business future is at stake if we are not adequately insured. Considering that premiums for Term Life Insurance are at an all-time low, and with our new “easy to apply” website, there is absolutely no reason to be underinsured and unnecessarily financially expose those you love. With one click, if you are healthy and under age 65, you can get a Term life insurance policy up to $2 million, potentially without a medical exam. With one click, you can have an agent-free experience, where you can log in to our user-friendly website, quote yourself, apply, and put your policy in force in less than 15 minutes. So, what are you waiting for? [Go ahead and click here now.]( [CLICK HERE...]( Minimize Your Tax Return's Most Important Number in Retirement: Strategy #7: Maximize AGI some years. This is counterintuitive, but at times it’s a good strategy for retirees. Maximize AGI one year so that it is low in future years. For example, convert traditional IRAs and other retirement accounts to Roth accounts. You’ll pay higher taxes in the year of the conversion but have lower AGI later. You also can sell investments you’ve held for a long time and that have significant capital gains. If you spread the gains over the years, they might keep your AGI high enough to trigger Stealth Taxes every year. But if you take a lot of the gains one year, the Stealth Taxes might be triggered that year but avoided in future years. You might have other types of income or gains that can be accelerated into one year. Do some careful tax planning before using this strategy. You might even want to work with a CPA. Be reasonably sure that you’ll benefit over the long haul by paying higher taxes one year to reduce future AGI. Keep in mind that income and capital gains tax rates could increase in the future, making it more beneficial to pay some taxes now. When your income and expenses are flexible, a good strategy might be to alternate high AGI and low AGI years. Not everyone can do this. But consider taking extra IRA distributions and capital gains while deferring any deductions that reduce AGI in one year. The next year, take actions to minimize AGI. The extra income you generated the first year helps cover your spending in the second year. One year you’ll pay some Stealth Taxes, the next year you might not. That could be better than paying the Stealth Taxes every year. Minimize Your Tax Return's Most Important Number in Retirement: Strategy #8: Consider deferred annuities. This strategy is for retirees and pre-retirees who have money that’s invested conservatively in taxable accounts and who don’t need to spend the interest income each year. They’re letting the interest compound for the future. That interest is included in your gross income and AGI each year. You’re paying both income taxes and perhaps the Stealth Taxes on it. A better strategy might be to move some of those assets into a deferred fixed annuity or a deferred indexed annuity. The money will earn interest, but it will compound tax deferred. Income and Stealth Taxes won’t be due until the interest income is distributed to you, and you have some control over when that happens. The annuity also is likely to earn higher rates than conservative taxable investments. Minimize Your Tax Return's Most Important Number in Retirement: Strategy #9: Recognize the tax-exempt interest trap. Interest on bonds issued by state and local governments is exempt from federal income taxes. It isn’t included in gross income. Many people think they’ll avoid the Stealth Taxes by moving all their taxable income investments into tax-exempt bonds. But the Stealth Taxes are triggered by modified AGI, not regular AGI. You add tax-exempt interest, foreign-earned income and a few other sources of tax-exempt income to regular AGI to modified AG for computing the Stealth Taxes. So, there’s a trade-off with tax-exempt bonds. They will reduce your regular income taxes but might not save you from Stealth Taxes. The regular income tax savings can make investing in tax-exempt bonds worthwhile, but don’t think it will avoid the Stealth Taxes. To a better retirement, [Bob Carlson] Bob Carlson Editor, Retirement Watch Weekly Editor’s Note: Congress is spurring on the most dangerous retirement threat of the last 50 years. America’s top retirement researcher reveals the deadly truth behind this government move…Plus the ONLY way to fully protect your wealth in the coming months. [Click Here for the Full Story.]( SPONSORED [3 A.I. Stock Picks (On Us)]( [image]( It’s time to instantly scan, pick the best stocks, and identify trend reversals in as little as 15 minutes with up to 87.4% proven accuracy. [CLICK HERE...]( Want More Retirement Advice? Check out my website, [RetirementWatch.com](, where you’ll find hundreds of free articles covering every aspect of retirement planning. Popular Posts: [Nine Important Things to Know Before Contributing to an IRA]( [How to Help Children or Grandchildren Buy a Home]( [Building the Complete Estate Plan]( [Finding Higher Returns With Low Risk]( New to the Retirement Watch Community: SeniorResource.com Hospital stays are a challenging process. What do you do if you don’t like the providers seeing you in the hospital? What are the most important things you can do to promote healing and get home faster? Is it possible to have a positive experience when you’re in the hospital for a prolonged amount of time? [Click here for some advice.]( About Bob Carlson: [Bob Carlson]Robert C. Carlson is the author of the books The New Rules of Retirement and Retirement Tax Guide, editor and investment director of the popular retirement newsletter, Retirement Watch, and editor of the free weekly e-letter, Retirement Watch Weekly. Bob is a frequent speaker at investment conferences around the country, and you can also hear Bob as a featured guest on nationally-syndicated radio shows, such as The Retirement Hour, Dateline Washington, Family News in Focus, The Michael Reagan Show, Money Matters and The Stock Doctor. About Us: Eagle Financial Publications is located in Washington, D.C. – only a few blocks from the Capitol. Our products have been helping investors build their wealth for several decades. Whether you’re a long-term investor or short-term trader, you’ll find the right strategy for you, including how to earn more steady income to spend now, preserve and grow your capital to enjoy later, and whatever other investment goals you have. Visit Our Websites: - [StockInvestor.com]( - [DividendInvestor.com]( - [DayTradeSPY.com]( - [CoveredCall](.com - [MarkSkousen.com]( - [GilderReport.com]( - [BryanPerryInvesting.com]( - [JimWoodsInvesting.com]( - [InvestmentHouse.com]( - [RetirementWatch.com]( - [SeniorResource.com]( - [GenerationalWealthStrategies.com]( - [[YouTube] Visit our YouTube Channel - Eagle Investing Network]( To ensure future delivery of Eagle Financial Publications emails please add financial@info2.eaglefinancialpublications.com to your address book or contact list. View this email in your [web browser](. This email was sent to {EMAIL} because you are subscribed to Bob Carlson's Retirement Watch Weekly. To unsubscribe please click [here](. If you have questions, please send them to [Customer Service](mailto:customerservice@eaglefinancialpublications.com). Legal Disclaimer: Any and all communications from Eagle Products, LLC. employees should not be considered advice on finances. Although our employees may answer your general customer service questions, they are not licensed under securities laws to address your particular investment situation. No communication by our employees to you should be deemed as personalized advice on finances. Eagle Financial Publications - Eagle Products, LLC. - a Salem Communications Holding Company 122 C Street NW, Suite 515 | Washington, D.C. 20001 [Link](