Bridgeriver LLC May 2019



The Devil Is in the Details

A Cheat Sheet for Knowing Your Tax Status and Mastering It

It doesn’t matter how old or young you are; life never stops throwing you curveballs. This is especially true given the seemingly endless stream of tax reforms that take place every few years. Whether you’re retired or still working, the good news is you don’t have to be left in the dark on your tax status. That’s where Bridgeriver comes in. With years of experience and industry accolades, we offer our clients the best insight into how they can take advantage of their tax levels. The first step is realizing what these advantages are. The problem with the usual tax preparation model is most of the time, investors visit their tax preparer after their tax year is already over, when it’s too late to do most planning. Not to mention, tax preparers have a looming deadline and not much time to review strategies. Two main factors affect taxed individuals: regular income and tax-free income. Each comes with its own unique set of tax rates and, thus, its own unique set of advantages. Regular income taxed at your regular income tax rates includes your retirement accounts and pensions, which may be partially or fully tax- free in some states. Another important income is your Social Security. Of your total Social Security, a maximum of 85 percent could be taxed at your regular income tax rates. Then, you have your short-term capital gains, interest, and nonqualified dividends, which all contribute to the government’s final say regarding your tax bracket. If you have any of these, they will be lumped under regular tax rates, which could be the highest. Then, you have your tax-free income, like any money you get that comes directly from a Roth individual retirement account (IRA) or a life insurance policy. In a more specific bracket, your capital gains won’t be taxed if you’re in the 10–12 percent income rate. Funds from a reverse mortgage are also tax-free. If you’re 62 or older and have equity in your home, you may be

able to take this money out tax-free, as it’s technically considered to be a loan with no payments. Finally, as we discussed previously, the other 15 percent of your Social Security benefits is tax-free. It’s important to note that a middle ground does exist with certain types of income. Annuities are taxed differently depending if they’re inside a traditional IRA or not. Whether or not these annuities are deferred or immediate is also considered. For more on the complicated world of annuity taxation, head over to my YouTube channel where I explain this in a recent video. When it comes to strategies to stretch your income, you’ll want to stay at or below the 12 percent tax. That way, your qualified dividends and capital gains are tax-free, and your Social Security will most likely be tax free. Then, if you need more income, take it from the tax-free income. Qualified dividends and capital gains will remain tax-free. This is one of the most powerful tax strategies, and we’re just getting started. You don’t have to worry about keeping all these numbers handy. With the specialized knowledge that has seen countless Bridgeriver clients save money over the years, you will get the best possible strategies for your tax bracket. To learn more, give us a call at 248.785.3734 or visit our website anytime at, where you’ll have access to a series of YouTube videos that put these tips into a visual medium.

-Dan Casey



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