The best tax strategy in retirement

[Artemishunt69]

In retirement, I will get a pension and also taking 3700 a month from, first my 457 account and then my 401A account.  Rule 55 applies to me and my employer sponsored 401 A account.  What is the best tax strategy to use to decrease income taxes.  I am in the state of California.

[dev145]

It is very hard to provide a definite answer without knowing what other type of income you will have, what is your filing status, pension amount, itemized vs. standard deduction.  If you know the estimated amount for each source of income, I would advise that you either use our online tax calculator or download our TurboTax desktop software to create a dummy return to see how changes in amount will impact taxes. 

If you have already filed taxes using TurboTax online, you can download the desktop for free or you can purchase one for 2025 once available in a few weeks.

https://turbotax.intuit.com/tax-tools/calculators/taxcaster/

https://turbotax.intuit.com/personal-taxes/cd-download/

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[MythSaraLee]

@dev145 

Thank you for your help for "TurboTax's Ask the Expert event" today.

I also have a question. If my pension amount is quite low (lower than $1000 per month), and my traditional IRA amount is also quite low, it is 6000 + bank interests (several hundred dollars), are the $6000 contribution and the bank interests taxable in the next year?

And I plan to provide volunteering works in my community. The info and basic cost could be filed in schedule A, right?

Thanks a lot.

[dev145]

$6000 is only taxable if you withdraw. If that $6,000 was pre tax contribution, then it will be taxable in the year you withdraw along with bank interest. Taxable does not necessarily mean you will pay taxes. For example, your total taxable income (taxable retirement, taxable interest and any other taxable income) is $20,000 and you have itemized deduction of $20,000 or more, you taxable income will be zero since deduction will wipe out all that income and you will not pay any taxes. But let's say your total income is $30,000 instead of $20,000 and itemized deduction is still $20,000, you will only pay taxes on remaining $10,000.

Yes, you are correct, any charitable donations, miles driven will go on Schedule A. 

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[MythSaraLee]

@dev145 Thank you so much!

One more question.

We donated to a new built church for around $20000 because of their urgent needs.

The donation amount covers our entire W-2 of this year (more than our incomes).

Usually how could we list this donation into our tax form to get a full tax refund?

Will that affect the FICA amount?

Thanks again. 

[dburns1]

 In order to deduct the donation, you must itemize your deductions. Donations can lower your tax bill if you itemize deductions on Schedule A of your federal tax return. Since the Tax Cuts and Jobs Act of 2017 significantly increased the standard deduction, you should compare your total itemized deductions to the standard deduction to see which provides a greater tax benefit. 

For cash donations to public charities, you can generally deduct up to 60% of your adjusted gross income(AGI). Since there are limitations to the amount you can deduct you may still owe tax after taking the deduction. This donation has nothing to do with the FICA tax and you will not get that amount refunded.

[MythSaraLee]

@dburns1 @dev145 Thanks a lot.

I see.

Thus, I could deduct 60% of AGI.

Is the 1098T or 529 good for adjusting the AGI? 

What is the form number for the NYC city tax's education credits, donations and home credits?

[dev145]

Form 1098-T is a form that your education institute will provide when you pay for education expenses. You can use this form to claim education credit but it will not impact your AGI. 529 plan is state education plan and any contribution to 529 plan is only deductible on state return, it will have no impact on federal return or AGI. 

I am not aware of any specific education credit for NYC. NY state does offer credit for education if you qualify.  This goes on form IT-272.

https://www.tax.ny.gov/pit/credits/college_tuition_credit.htm

For charitable donation, no deduction from NYC either but the state provides credit if you donate to certain funds.  This will be on form IT-228

https://www.tax.ny.gov/pit/credits/contributions-to-certain-funds-credit.htm

There is also a credit for property tax from state of NY.  Form for this credit is IT-214.

https://www.tax.ny.gov/pit/credits/real_property_tax_credit.htm

NYC offers something like assistance for first time home buyer but it is not related with your tax return. See below link to see what is the qualification and how to apply if you qualify. 

https://access.nyc.gov/programs/homefirst-down-payment-assistance/#how-it-works

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[MythSaraLee]

@dev145 Thank you so much for your help.

I will open a new topic in "get your taxes done" for my other questions.

I found I could not open a new post after the 10.22 event date.

Please go to the new post link. Thanks.

https://ttlc.intuit.com/community/taxes/discussion/re-does-turbotax-have-tax-webinars-online-for-the...

[MythSaraLee]

@dev145 @dburns1 

I have one more question.

Usually what is the tendency of NYS and NYC tax-filing?

Which terms do they usually prefer to putting in our tax-returns, like education credits, home credits or moving expense? Thanks.