W4 & Related

[pacific_calm]

Last year was my first year of retirement.  While spouse will continue to work a few more years as she is younger, I am 65 and my retirement income consists if SS, a gov't pension, $2500 a month from regular TSP, and we have some rental income.  That first year of retirement got hit with a 11K+ tax bill.  In reviewing spouse's W4, we changed it to Head of Household as it withheld more.  Was that a correct move?  Also, as an aside, one of our continued disappointments is we can never take advantage of our Schedule E deductions because our combined incomes are/were too high.  Also, the $2500.00 monthly amount from the TSP is a must right now to balance income with expenses given our home is in expensive HI.  Thinking too of converting - over the next four year time period - the TSP to a Roth IRA,  Good move?  We own - or should I say, the baqnk owns - our home with anticipated payoff in 2037 as I am making extra principal payments.  Any helpful suggestions would be beneficial.  Thank you.

[fchiang]

Hi pacific_calm,

Aloha!

Thank you for your questions. Regarding the 11k+ tax bill, having more tax withheld will be helpful and avoid triggering the underpayment penalty. You can always put Additional Withholding in Step 4 (c) on W-4 for Extra Withholdings if you need. Our W-4 Calculator is a great tool to help you to find out if you need to withhold more so you can adjust your W-4. 

https://turbotax.intuit.com/tax-tools/calculators/w4/

For your rental deduction, there is limit to offset the loss if your AGI is high and here is the link for your reference. https://www.thebalance.com/rental-income-and-expenses-3193476

For TSP to Roth, this article may be a good one to help you. 

https://www.finra.org/sites/default/files/2020-12/thinking-about-rolling-over-funds-from-your-thrift...

You may give TurboTax a call anytime and we can review the impacts with you for each scenario. 

Have a wonderful day and mahalo!