Ten Steps to a Smarter Tax Return

Use the following links to learn more about the various tax breaks and strategies discussed in this workshop.

New Tax Law for 2018

Karen Chan, Plan Well, Retire Well blog, University of Illinois Extension:

• How Will the Tax Cuts and Jobs Act of 2017 Affect You?
  • Check This Head-to-Head, Line-by-Line Comparison of Your 2017 and 2018 Tax Returns
  • Part 2: Tax Rates
  • Inflation Adjustments, IRAs, 529 Plans, ABLE Accounts, Student Loans, & Estate Tax

Tax brackets

Marginal tax rates 2018 (jpg)

Don’t count on itemizing

Adjustments to Income, formerly called Above the Line Deductions:

• Student loan interest deduction (Ch. 4), tuition and fees deduction
  • IRS Publication 970, Tax Benefits for Education, https://www.irs.gov/pub/irs-pdf/p970.pdf

Qualified Charitable Distributions

• If you’re over 72 (the new age for required minimum distributions as of 2020) and have an IRA, you can avoid tax on your required minimum distribution by using part or all of it to make a Qualified Charitable Distribution.
  • Nerd’s Eye Blog by Michael Kitces, Rules And Requirements For Doing A Qualified Charitable Distribution (QCD) From An IRA, https://www.kitces.com/blog/qualified-charitable-distribution-qcd-from-ira-to-satisfy-rmd-rules-and-requirements/

Pay no tax on growth.

529 plans (Chapter 8 – Qualified Tuition Programs) and Coverdell Education Savings Accounts (Ch. 7)

• IRS Publication 970, Tax Benefits for Education, https://www.irs.gov/pub/irs-pdf/p970.pdf

Roth accounts

• Karen Chan, Plan Well, Retire Well blog, University of Illinois Extension:
  Dear Young Friend: IRAs Offer Tax Breaks on Your Long Term Money

Pay zero tax on part of your wages.

Health Savings Accounts

• Karen Chan, Plan Well, Retire Well blog, University of Illinois Extension:
  • Health Savings Accounts: What’s Not to Love?
  • Health Savings Accounts: Ten Things to Do and Not Do

Flexible Spending Accounts

• IRS Publication 969, Health Savings Accounts and Other Tax-Favored Health Plans,  beginning on p. 15

Follow rules for IRAs and retirement accounts

IRAs & employer plans, Name beneficiaries, Inherited IRAs, rollovers and transfers

• Karen Chan and Charlotte Crawford, University of Illinois Extension, Rules for Taking Distributions from Tax-Deferred Retirement Savings Plans   
  • Please note that some rules have changed since this document was published. Mainly, the age for required minimum distributions to 72, and beneficiaries (other than spouses and a few other exceptions) must deplete the inherited account within 10 years.

Exclude taxable income on the sale of your home

Tax on sale of a home

• IRS Topic 701- Sale of Your Home

Take advantage of swings in income

Tax rates

•    Karen Chan, Plan Well, Retire Well blog, University of Illinois Extension: What’s Your income Tax Bracket?

Contribute or convert to a Roth in low income years

• Karen Chan, Plan Well, Retire Well blog, University of Illinois Extension:
  • Dear Young Friend: IRAs Offer Tax Breaks on Your Long Term Money
  • Converting to a Roth IRA, Part 1: The (New) Rules
  • Converting to a Roth IRA, Part 2: Factors to Consider

Understand basis for gifts & nheritances

FindLaw for Legal Professionals, Tax Basis of Inherited and Gifted Property

Use “Asset Location” to increase tax efficiency 

Karen Chan, Plan Well, Retire Well blog, University of Illinois Extension:

• Asset Location
• A Real Life Example of Rebalancing + Asset Location