Beating the Tax Bracket Racket -

The United States uses a progressive tax system, meaning as you earn more, you may cross over into a higher tax brackets. This is known as “bracket bumping.” The goal of tax planning is to remain in the lowest bracket possible and plan accordingly to avoid bracket bumping. As a taxpayer, there are some basic concepts to understand so you and your tax consultant can have an informed conversation. Personal-service income includes salary, bonuses, business income, and for retirees maybe Social Security benefits. Portfolio income is generated from dividends, interest, royalties and capital gains. Finally, passive income comes from limited partnerships, rental income and capital gains on passive activities.

There are several opportunities to reduce you tax bill by qualifying for certain adjustments. As you get older, you may be subject age-related health issues. So on the medical front, contributing to a medical savings or health savings accounts can offer a tax deduction and free access to pay for legitimate medical expenses. Taxable retirement contributions to IRAs, Keogh and self employed SEP or even Simple Plans can have significant impact on reducing taxable income during your working years. It can be even more critical for seniors to understand the tax implications during retirement.

If you can afford to delay taking Social Security benefits on the primary breadwinner to age 70 and your qualified retirement plan income to age 70½, it could really enhance your overall retirement revenue significantly. Another tax strategy to help mitigate the taxation of required minimum distributions from your qualified plan is using Qualified Longevity Annuity Contracts to delay some portion of you required minimum distributions from age 70½ to age 85. You need to consult your financial advisor on the rules of engagement on all these tax-planning tips. For retirees, tax planning is often the difference between living on a tight budget and enjoying a lifestyle with discretionary income. Remember, if you have discretionary control of “when” you receive income, you may be able to mitigate your tax bill and keep more of your money.

For more information on basic tax planning and how it can let you keep more of your money, just go to onthemoneynews.com and fill out a request form right on the home page.https://www.youtube.com/watch?v=h0fzKWPcBJQ&feature=youtu.be