I am near the 12% without drawing any money from my taxable account and I have ira with rmd and a taxable account
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Hi Skitter,
Good question, but to hopefully ease your mind a little remember that only the taxable income above the 12% tax bracket will be taxed at 22% (the next bracket). Your whole income will not be taxed at that amount. For example, the top of the 12% bracket is $40,525 for single filers. So, if your taxable income is $50,000 only $9,475 is taxed at 22%.
If you are still concerned about how to reduce your taxable income and you are not in control of how much you can take out of your IRA due to RMDs, then the only other option is to see if you can increase your deductions by itemizing unless the standard deduction is greater.
Another option is If you make substantial charitable contributions, some charities can accept contributions directly from IRAs where you get the benefit of the donation deduction but will no incur the tax consequence.
Not really supposed to share articles outside the TurboTax realm, but...
@ JaredS_CPA wrote:. For example, the top of the 12% bracket is $40,525 for single filers. So, if your taxable income is $50,000 only $475 is taxed at 22%.
Was that a typo above? In your example with the 2021 bracket, you said "$475", but didn't you mean to say that $9,475 would be taxed at the 22% rate; i.e., $50,000-40,525?
As usual, the brackets increase slightly for 2022. This year the break point between the 12% and 22% tax bracket increases to $41,775 (single filer).
Yes, sorry, that was a typo. I corrected it. Thanks for catching it.
You don’t mention what your “taxable account” is. However, if you have an investment account you may be able to change your portfolio to reduce your taxable income.
For example, you can invest in municipal bonds in your state, which would be free of federal or state tax.
If you have investments such as mutual funds that produce large capital gains, you may be able to switch to similar investments that utilise exchange traded funds (ETFs).
Keep in mind, some strategies may work for tax savings but may not produce the highest returns. Speak with your investment advisor.
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