I completed my 2021 tax returns and put them in the mail last week. Now, I'll be planning our tax strategy for 2022, specifically income and deductions.
As a retiree, I have some ability to influence our yearly income since we have no W-2 wage income. In the past, our only regular income was rental income, interest and dividend income. The rental income has been about the same for years. Interest and dividend income varied. Two incomes that are able to be manage: Capital gains income and IRA distribution income can be controlled each year. By taking more or less Capital Gains or IRA distributions, I can predict what our tax liability was for the year.
In 2022, will have some additional income that we no or less control over. I started taking Social Security this year. In addition, my spouse will need take RMDs from an inherited IRA over the next 10 years. So it will even be more important for us to manage our discretionary income sources in 2022.
My goal is to keep our income in the 12% tax bracket and in the 0% long term capital gains tax bracket.
My tool for managing our tax liability is Excel. Each year, I put the forms into Excel spreadsheets and link the numbers as done on the tax forms. That way, I can make changes and determine the effect on the tax owed. I find using Excel easier and better than using tax software. Excel allows me to make changes and see the reasons that cause the changes in our tax liability. It's easy to run different scenarios.
The only downside is I need to do the update to the tax forms myself. But that is a small price to pay for the benefit I get.
This is not financial, investment nor tax advice. Please consult a professional advisor.
Copyright © 2022 Achievement Catalyst, LLC
Subscribe to My Wealth Builder
No comments:
Post a Comment