Marsh’s financial Q & A
In our continuing e-mailbag series, here are some new real-life questions and answers to share with you:
Question: I used to itemize my deductions but under the new tax law, I’ll start using the $24,000 standard deduction for my wife and me. Is there anything else I can do to save [on]taxes?
Answer: We’re recommending that people consider grouping or “bunching” their itemized deductions into one tax year, so that every other year there are enough expenses to itemize. For example, pay two years of assessed property taxes in one calendar year, stagger your charitable giving more heavily into alternating years, and to the extent you can, consolidate medical procedures into alternating years to boost the total amount of deductible costs.
Question: My husband passed away in his late 50s and I am eligible for his widow’s benefit. Should I take it when I turn 60 or wait?
Answer: Widow’s benefits taken before your Full Retirement Age (66) are subject to earnings limits. So if you are working, be careful of the $17,040 wage limit. If you aren’t working, one strategy is to take your widow’s benefit at age 60 and let your own benefit grow to its maximum at age 70. Then switch and take your own benefit at that time, if it’s bigger. Lots of options are available to widows.
Question: I am 74, and my wife and I pay an extra surcharge for Medicare because our IRA Required Minimum Distribution pushes our income over the threshold. Any ideas that could help us?
Answer: It’s true that married couples with adjusted gross income over $174,000 pay a surcharge for their Part B and Part D plans. There is an easy solution if you do any charitable giving. Direct your IRA custodian to disburse some portion of your RMD directly to your charity/church, and you can exclude that amount as taxable income. For example, if your RMD is $30,000 and you give $10,000 directly to your charity, your taxable income is only $20,000. You can use this tool for up to $100,000 per year, even if your RMD is less than that. So if you don’t otherwise have enough deductions to itemize, this is a perfect way to restore a tax deduction for your charitable giving.
Have Questions? Send your financial questions to Yvonne Marsh, CFP®, CPA at firstname.lastname@example.org, and she will review them for possible inclusion in a future column.