I recently did our taxes using TaxAct and my AGI is over the $150K limit by just under $2K. I max out my 401(k) contribution limit every year, my wife is in the State Teacher's Retirement System and additionally contributes a little to her 403(b). Is there anything I can do between now and tax day (April 15, May 17) to reduce my AGI below $150K for my 2020 taxes?

I spoke with my financial advisor this morning and he in a nutshell he said I'm screwed.

Thanks in advance!

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Married filing Jointly w/ 3 kids (12,16,19)
$152,509 Reported Income
$1,550 Adjustments to Income
$150,959 Adjusted Income
$36,015 Deductions
$114,944 Taxable Income
Max out my 401(k) annually

2020 IRA Deduction Limits

My Solution
IRS Publication 969 - Health Savings Accounts and Other Tax-Favored Health Plans

Limit on Contributions
The amount you or any other person can contribute to your HSA depends on the type of HDHP coverage you have, your age, the date you become an eligible individual, and the date you cease to be an eligible individual. For 2020, if you have self-only HDHP coverage, you can contribute up to $3,550. If you have family HDHP coverage, you can contribute up to $7,100.

Form 8889. Report all contributions to your HSA on Form 8889 and file it with your Form 1040, 1040-SR, or 1040-NR. You should include all contributions made for 2020, including those made from January 1, 2020, through April 15, 2021, that are designated for 2020. Contributions made by your employer and qualified HSA funding distributions are also shown on the form.

This message has been edited. Last edited by: jcsabolt2,

HSA contribution? Obviously, your advisor should know about that option and probably anything else an amateur like me could come up with.

Would have to know a whole lot more about you to give advice, mediocre advice that is

Did you take advantage of "charitable contributions"?

Can you make deductible 2020 IRA contributions?

What's "magic" about $150K?

quote:

Originally posted by 229DAK:
Can you make deductible 2020 IRA contributions?

Since he already has a 401k through work, and they make over $125k, he can't deduct IRA contributions.

(The AGI limit for a single person with a 401k to be able to deduct their IRA contributions is $76k.)

If you’re trying to get below $150K to get the $2800 and can’t do it with the 2020 return, try reducing your expected 2021 income and file for it a year from now (from Kipplinger):

“However, if you don't get a third stimulus check (or you don't get a full one) because your 2019 or 2020 income is too high, you still might qualify for a Recovery Rebate credit on your 2021 tax return. That's because the tax credit will be based on your 2021 AGI, which could be lower than either your 2019 or 2020 income. For example, if you're single and your 2020 AGI was above $80,000, you don't qualify for a third stimulus check. But what if your 2021 income drops to under $75,000. In that case, you're eligible for a $1,400 Recovery Rebate credit on your 2021 tax return.”

This is referencing a single person’s AGI; double the numbers for your situation.

Assuming your tax adviser is aware of all aspects of your situation, if they say you're screwed, sorry to say, then you probably are.

That said, first, on St. Patrick's day, the IRS delayed Federal tax day to May 17 so you have a bit more time to wriggle around. IRS.gov - Update on 2021 tax deadline

Second, here are some ideas from Block Advisors (H&R Block):

quote:

How Can You Reduce Your AGI?
Some deductions you may be eligible for to reduce your adjusted gross income include:

Alimony

Educator expense deduction

Health savings account contributions

Retirement plan contributions, like IRA or self-employed retirement plan contributions

For the self-employed, health insurance and one half of S/E tax

Moving expenses

Student loan interest

Each of these deductions has eligibility qualifications and limitations.

Good luck!

Don't tell me you're trying to get below $150,000 to qualify for the stimulus check??????

If you have any grandchildren you can set up a 529 plan and contribute up to $4000 individually to it.

You do realize even with an AGI $2,500 above the $150,000 you're still going to get most of the stimulus coming your way for joint filers + 3 kids?

For every $100 above the $150,000 up to $200,000 (I think?) the payouts get reduced by $5

If my math is correct you are looking at $6,875 instead of $7,000

5 people x $1,400 = $7,000

$2,500 over AGI of $150,000 = you get reduced by $125

$7,000 - $125 = $6,875

quote:

Originally posted by PASig:
You do realize even with an AGI $2,500 above the $150,000 you're still going to get most of the stimulus coming your way for joint filers + 3 kids?

For every $100 above the $150,000 up to $200,000 (I think?) the payouts get reduced by $5

If my math is correct you are looking at $6,875 instead of $7,000

5 people x $1,400 = $7,000

$2,500 over AGI of $150,000 = you get reduced by $125

$7,000 - $125 = $6,875

His take would be $5,250.

And the cutoff for getting anything is not $200,000 anymore. It was reduced to $160,000 for the third handout.

quote:

Originally posted by Rey HRH:
Don't tell me you're trying to get below $150,000 to qualify for the stimulus check??????

You can't blame him since Warren Buffett thinks it is a good idea.

Warren Buffett says make this the priority for your $1,400 stimulus check
Doug Whiteman
Thu, March 25, 2021, 4:05 PM·

The IRS says it just sent out a second batch of $1,400 stimulus checks, with an official pay date of March 24, and says more will follow on a weekly basis. About 127 million relief payments have been distributed so far, worth around $325 billion.

But no matter how many batches go out, investing legend Warren Buffett will never get a stimulus check.

It's not because his net worth recently brushed $100 billion. Instead, his annual income — including a $100,000 salary and billions from dividends — puts him way over the limit to qualify for the third stimulus payment (and the fourth, if that comes along).

Even so, Buffett is a good source of advice on what to do with your relief money. He'd tell you to start by tackling one big priority.
The best use for stimulus cash, according to Buffett

Buffett has some simple advice on what to do with your $1,400 stimulus check, or any extra cash that falls your way: Get rid of credit card debt. "The first thing I'd do with any money I had would be to pay it off," he says.

During a 2020 online shareholders meeting for his company, Berkshire Hathaway, Buffett said a mistake is using credit cards "as a piggy bank to be raided."

He told the story of a friend who'd come into a windfall and asked his advice on what to do with it. He learned that the woman also was carrying a credit card balance — at 18% interest.

The investing icon told her to ditch the debt first thing. "It just doesn’t make sense," he told the shareholders, according to a transcript. "You can’t go through life borrowing money at those rates and be better off."

If your $1,400 stimulus check won't totally erase your credit card debt, you might make your remaining balances more manageable and affordable by sweeping them up into a debt consolidation loan at lower interest.
But don't use your stimulus check for another kind of debt

Though Buffett acknowledged at the shareholders meeting that "the world is in love with credit cards," he's strongly opposed to carrying balances and not paying them off.

https://finance.yahoo.com/news...1-400-151000599.html

Start a HSA? It's the next shelter after maxing out Roth/401k.

If this is for the stimulus eligibility, and you haven't claimed your 2020 taxes yet, and you are under 150,000 in 2019... wait until the last minute.
They'll base your stimulus off your 2019 taxes, and you will not be required to pay back any differences of you fail to qualify based on your 2020 income.
https://www.cnet.com/personal-...ns-for-your-payment/

This is for entertainment purposes only. It is NOT tax advice.

You need to locate all of your losing tickets from betting on the horses and then take them as an ordinary gambling loss. Since you are a professional gambler.

It is nearly impossible to do any tax planning after the tax year has ended.

quote:

Originally posted by SIG4EVA:
Start a HSA? It's the next shelter after maxing out Roth/401k.

Roth IRAs are not tax shelters, for anyone. Roth IRA contributions are post-tax. With a Roth, you're trading paying income tax on the money now in exchange for not having to pay any taxes on the gains or the withdrawals later.

Traditional IRA contributions can be pre-tax (like 401k/407b contributions). But as noted in my earlier post, he makes to much to qualify for a tax deduction for Traditional IRA contributions. Traditional IRA contributions are only deductible if your AGI is less than $76k if single or $125k if married, unless you have no access to a retirement plan through your employer. If you make over that, and are covered by an employer retirement plan like his 401k, you cannot take that Traditional IRA contribution deduction.

So there's no tax shelter benefit in either type of IRA for the OP.

Yo Rogue

Question about Roth IRA, specifically 2020. I have until May 15th to contribute for 2020. Do I have to invest it before May 15th to count for 2020 or can it sit for a while in the Roth? Maybe waiting a bit for a market correction

I wasn't saying the roth was a tax shelter, but that after maxing out your 401k's, HSA would be the next step.

quote:

Originally posted by BigSwede:
Yo Rogue

Question about Roth IRA, specifically 2020. I have until May 15th to contribute for 2020. Do I have to invest it before May 15th to count for 2020 or can it sit for a while in the Roth? Maybe waiting a bit for a market correction

Basically, you make the contribution, and then can have it sit in your IRA account until you decide to invest it into specific equities now or at a later date.

But technically, as soon as the contributed money hits your IRA account, it's going to be "invested" in your settlement fund (sometimes called a sweep account, holding fund, etc.), which is usually set by default to something like a basic ultra-safe Money Market Fund that holds at a steady $1/share price, so you can then later move it dollar-for-dollar into something more specific. You'll still get a tiny return on money that's sitting in this fund, but it's usually pretty small at something like 0.5% or 1% annual rate of return. Think of it kinda like a high yield savings account for IRA contributions that are just sitting there.

This default settlement fund is also where money goes when you sell a specific investment, or receive dividends, before you either withdraw the proceeds or reinvest them in something else.

This message has been edited. Last edited by: RogueJSK,

Thanks