Tax Planning for Major Life Events
Most of life's major financial decisions, including marriage or divorce, the birth of a child, purchasing or selling a home, and planning for retirement,
have tax ramifications. As you encounter those events, keep these
tax-planning tips in mind...
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What Is Your Marginal Tax Rate?
If you answer that question by looking at
the tax rate tables that show income tax rates of 10%, 15%, 25%,
28%, 33%, and 35%, you could be understating your real marginal
tax rate. Your marginal tax rate could be higher due to numerous
provisions that phase out or limit certain deductions, credits,
and other tax benefits.
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Undoing a Roth Conversion
When converting a traditional individual
retirement account (IRA) to a Roth IRA, transferred amounts must
be included in income if taxable when withdrawn (e.g., contributions
and earnings in traditional IRAs and earnings in nondeductible
IRAs), but are exempt from the 10% federal income tax penalty.
Your adjusted gross income (AGI) cannot exceed $100,000 in the
conversion year, excluding any converted amounts.
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Selling Your Home at a Loss
With the real estate market slowing, more
taxpayers may find themselves in a situation where the sale of
their home results in a tax loss or their net sale's price is
less than the amount of their outstanding mortgage.
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Your Parents and Their Estate Plans
Estate planning can be a difficult subject
to discuss with your parents. You don't want to seem concerned
about how much money they may eventually leave you, while they
may fear you are interfering with their finances. But to help
ensure their estate is settled quickly according to their wishes,
family members should have some basic information. You don't need
to know the specifics about who will receive what, but you should
find out these things.
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