-
Welcome to the TSP Talk Forums forums.
You are currently viewing our boards as a guest which gives you limited access to view most discussions and access our other features. By joining our free community you will have access to post topics, communicate privately with other members (PM), respond to polls, upload content, join our AutoTracker, and access many other special features. Registration is simple and absolutely free so please, join our community today!
If you have any problems with the registration process or your account login, please contact us. -
Please read our AutoTracker policy on the IFT deadline and remaining active. Thanks!
-
$ - Premium Service Content (Info) | AutoTracker Monthly Winners | Is Gmail et al, Blocking Our emails?
Find us on: Facebook & X | Posting Copyrighted Material
-
-
Join the TSP Talk AutoTracker: How to Get Started | Login | Main AutoTracker Page
-
The Forum works well on MOBILE devices without an app: Just go to: https://forum.tsptalk.com ...
Or you can now use TapaTalk again!
Reducing Tax Liability
- Thread starter Show-me
- Start date
Pill
Member
James48843
Well-known member
Show-me
Well-known member
Jackbnimble
Member
"You know what the difference is between you and me..... I make this look good." MIB
grandma, we have our methods. Show-Me, keep talking........
All, have a Merry Christmas.
grandma, we have our methods. Show-Me, keep talking........
All, have a Merry Christmas.
Well personally, this is what I do! I first Max out my Bonds. Which is 5000 per year. I max out the TSP of course 16500 or something like that. Since I have a child I also max out on FED spending plan which takes non taxed dollars out of your check and helps to pay for day care and medicine. I then can voucher what I spend and get my money back. so in total. 5K + 5K + 16.5K=26.5K. This drops me back into a modest tax bracket. I love it.
Jackbnimble
Member
mudigha, are you talking about Savings Bonds? If so I don't believe they come out pretax. Also, savings bonds would generally not be anywhere in my investment portfolio. It is convienient to have it taken out of your check, but the return on the EE bonds is lousy. I might understand the I bonds at 3% currently.
I am shring my opinion and I would like to hear your reasons for maxing out bonds? Also, are you using the I bonds and what purposes?
Thanks
Jack
Khotso
Active member
Looking for some advice. I have maxed out my TSP contributions this year and have some savings that I need to do something with. We plan to max out my wife's IRA contribution as well. I am considering dumping as much of my wages as I can into Catch-Up contributions in TSP over the last 2 bi-weekly pay-periods to reduce my 2012 tax liability further, and put that money to work.
But I also need to replace my roof next summer. I just don't want all of my savings sitting unproductive in a bank account till then. If I go the catch-up route, I'll probably have to do a home equity loan to pay that part of the re-roof costs (say, $5000). The 2012 tax savings would be what - $1250? On the other hand, I'll potentially end up paying interest on the home equity.
Any thoughts/suggestions on this?
But I also need to replace my roof next summer. I just don't want all of my savings sitting unproductive in a bank account till then. If I go the catch-up route, I'll probably have to do a home equity loan to pay that part of the re-roof costs (say, $5000). The 2012 tax savings would be what - $1250? On the other hand, I'll potentially end up paying interest on the home equity.
Any thoughts/suggestions on this?
Birchtree
Well-known member
Interest on a home equity line of credit is still tax deductable. To keep your life simple put the extra savings in your check book even if there is no growth - that's the way I'd do it. Keep building your savings account over the years because when you take it out it's not part of your adjusted gross income - money you can spend to keep yourself in a lower tax bracket. Money you can't control like an annuity or social security, will keep your adjusted gross income taxable at higher rates. You are not required to take your minimum distribution from TSP until you are 70 years old - a great tax deferral for awhile. Open a Roth IRA and invest with impunity because there is no paper work - the IRS is out of the equation.
Khotso
Active member
Thanks Birch. You captured the reasons I was ambivalent about this perfectly. Good advice and duly appreciated!
Frixxxx
Moderator
Your contributions are classified as tax-deferred if you put in your regular TSP. These will be in your W-2 Box 12 (with the dreaded Health Care cost designated DD)
If you have alternate income then it will be added into the equation at tax time.
If you contribute any/part/ all to a Roth TSP or IRA, this is after tax dollars and not a taxable item. EXCEPT when you are addressing limits.
Roth IRA's are a nice way to get tax-free on the gains at retirement withdrawal. MEaning, dependent on your tax position at time of investment and after retirement will drive your decision on When/If a Roth is good for you. If you try and lower your tax footprint on the load side or withdrawal side.
But if you need all the dedcutions you can get now, I would stay away from ROTH. If you have all you can take and you are happy with what you pay, then ROTH could be viable. I highly recommend that you read a bit and study your own goals and expectations to make the best decision. But I guess you've realized it is unique to each person.
PessOptimist
Well-known member
Everything Frixxxx said is true, even if he did used to live in the PRK.
I think you are looking for a simple answer. No. The amount you contribute to your regular (not Roth) TSP is not part of the wages listed in block 1 of your W-2. As Frixxxx stated it is in block 12 coded as D. DD is your health care cost, as stated. A quick check of this is to look at your last December LES. Not the pay date last one but the pay period end last one. Mine was Dec 27. Yours may be different. There will be a block (21 for me but I have found these forms differ from agency to agency) that lists Gross Pay, Taxable Wages and Nontaxable wages. These should match blocks 1, 3 and 12 of your W-2. Well, maybe not block 3 depending on your income.
Code D in block 12 means tax deferred. This means when you finally draw funds out of the TSP you will pay taxes at the rate appkicable to you when you withdraw them. Theoretically a lower rate since you will be old and retired. A theory I have yet to test though I do meet the old part.
The contributions you make to a any Roth you will pay taxes on for the year you earned them. When you withdraw Roth funds at a later date, the original contributions and any gains on those contributions are tax free. At least under the rules in place now. The answer to when is it a good idea depends on your situation. If you can afford to pay the taxes now it might be nice to have some money saved that was tax free. Keep in mind that the current rules could be changed by people who do not care about those who elected them.
I hope this answers your first question. If I am not correct on any of this I am sure someone will correct me.
Best of luck with the career and TSP.
PO
For any Alabama retirees out there a proposal is being considered this week to eliminate the state income tax exclusion for federal and state retirees annuities and Social Security income. Key consideration in where to retire. You may wish to express any concerns to the Governor's Office or your representatives.
Maricar19
Active member
In addition to Frixx's and PO's responses, you must keep your Roth for at least 5 years and you must be at least 591/2 to start withdrawals or else, you'll incur the 10% penalty...
