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We're heading into the RMD stage ... and also looking for ways to fund grandkids college funds (out of IRA / Annuity funds). We don't really 'need' the money represented by RMD withdrawals or college funds.
One way is to convert your traditional IRA withdrawals into a Roth IRA, up to the top of your current tax bracket, in the years prior to taking RMDs. You can also donate your IRA withdrawals.
One way is to convert your traditional IRA withdrawals into a Roth IRA, up to the top of your current tax bracket, in the years prior to taking RMDs. You can also donate your IRA withdrawals.
... So, in that way, I'm paying lower taxes on my RMD's ... plus, of course, taxes on the conversion? We may continue down the donation path.
Too late .... although we really aren't making all that much. I'm simply trying to figure out how to give LESS of it to the government - who will waste it anyway.
Agreed, but, there are a lot of smart people on this forum and life experience is often the best advice.
But they are not going to be there with you if its questioned later. Feds are not going to take I read it on the internet excuse. OP are talking about how to funding two college degree out of money they have but is restricted which is wroth getting paid professional advise from a CPA and with a family lawyer if available.
I assume it is a regular IRA and not a Roth IRA? If the funds come from a Roth, then they are not taxed.
Also, itemizing your deductions can reduce your tax bite. A good way of increasing the number of deductions you can itemize is to donate property as a charitable contribution instead of cash, especially if the property has appreciated in value since you purchased it.
Also, do you live in a low or no income tax state? if so, then it may be advisable to deduct your sales tax (by keeping track of your receipts) instead. Taxpayers who itemize may deduct either their sales tax or their state income tax, but not both.
For saving for college, I would recommend setting up 529 plans for your grandchildren. The investments from a 529 will grow tax free and be subject to income tax so long as the amounts from the account only go towards college expenses. 529 plan - Wikipedia, the free encyclopedia529 Plans: Questions and Answers Just be sure you don't contribute more than 14,000 (28,000 if from an opposite sex married couple) or else you will have to file a gift tax return and possibly have to pay a gift tax.
... So, in that way, I'm paying lower taxes on my RMD's ... plus, of course, taxes on the conversion? We may continue down the donation path.
The idea is you fill up the 15% income tax bracket prior to RMDs, converting them to Roth IRAs. This assumes RMDs would place you in the 25% tax bracket at some point. When you do need the funds, you can use the Roth to manage your taxable income to stay out of the higher brackets. Converting also reduces your later RMD amounts, since the IRA investment value is less.
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Any clever advice on reducing our tax bite?
