Reduce MAGI

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Mr_wynx
Posts: 2
Joined: Fri Jul 14, 2017 8:44 pm

Reduce MAGI

Postby Mr_wynx » Fri Jul 14, 2017 9:05 pm

Hello,

I am on track to make $105 this year, making maximum contributions to 401k and HSA. Full-time grad student and filing single; not a homeowner. I am interested in learning about possible strategies for reducing my MAGI to enable deductions for education expenses and student loan interest payments. By my calculations, my MAGI is going to be $84K for this year, so close enough to the $80K limit where deductions become possible.

Opening an IRA might be a good idea, but does not address the problem above. I've considered starting a 529 plan, since I do plan to have children, but not in the immediate future. Using a 529 in that situation doesn't seem like the smartest choice. Do other alternatives come to mind?

TBillT
Posts: 224
Joined: Sat Sep 17, 2011 1:43 pm

Re: Reduce MAGI

Postby TBillT » Sat Jul 15, 2017 9:47 am

Sounds like you may already be minimizing to the extent possible, but to check that, you could use Turbo Tax to explore if there are other deductions.
I am using itemized deductions, reversal of IRA withdrawals within 60 days, tax loss harvesting, making IRA contributions, to reduce my MAGI. SEP IRA would be something to look at if self-employed, but we do not know your situation. If you are planning a new plug-in car, I do not think that will reduce MAGI, but you can get up to $7500 federal tax credit and many states allow further deductions.

blueberry
Posts: 177
Joined: Thu Dec 03, 2015 11:37 am

Re: Reduce MAGI

Postby blueberry » Sat Jul 15, 2017 10:06 am

Is it a state university, and maybe you have access to deferred compensation?

Chadnudj
Posts: 616
Joined: Tue Oct 29, 2013 11:22 am

Re: Reduce MAGI

Postby Chadnudj » Sat Jul 15, 2017 10:12 am

Mr_wynx wrote:Hello,

I am on track to make $105 this year, making maximum contributions to 401k and HSA. Full-time grad student and filing single; not a homeowner. I am interested in learning about possible strategies for reducing my MAGI to enable deductions for education expenses and student loan interest payments. By my calculations, my MAGI is going to be $84K for this year, so close enough to the $80K limit where deductions become possible.

Opening an IRA might be a good idea, but does not address the problem above. I've considered starting a 529 plan, since I do plan to have children, but not in the immediate future. Using a 529 in that situation doesn't seem like the smartest choice. Do other alternatives come to mind?


I'm fairly certain a 529 will not affect your MAGI at all -- 529's can affect your state tax (by being deductible), but not your federal taxes at all.

Tax loss harvesting?

pshonore
Posts: 5329
Joined: Sun Jun 28, 2009 2:21 pm

Re: Reduce MAGI

Postby pshonore » Sat Jul 15, 2017 11:08 am

I believe the Student Loan interest deduction starts phasing out at 65K and is totally gone at 80K for a single filer. Getting your MAGI to 75K will allow a small deduction but might not be worth the trouble.

LSLover
Posts: 27
Joined: Thu May 19, 2016 1:39 pm

Re: Reduce MAGI

Postby LSLover » Sat Jul 15, 2017 11:14 am

TBillT wrote:Sounds like you may already be minimizing to the extent possible, but to check that, you could use Turbo Tax to explore if there are other deductions.
I am using itemized deductions, reversal of IRA withdrawals within 60 days, tax loss harvesting, making IRA contributions, to reduce my MAGI. SEP IRA would be something to look at if self-employed, but we do not know your situation. If you are planning a new plug-in car, I do not think that will reduce MAGI, but you can get up to $7500 federal tax credit and many states allow further deductions.


Itemizing deductions does not affect MAGI.

Mr_wynx
Posts: 2
Joined: Fri Jul 14, 2017 8:44 pm

Re: Reduce MAGI

Postby Mr_wynx » Sat Jul 15, 2017 2:09 pm

Thanks for the thoughts, everyone! I hadn't considered potential for tax loss harvesting or deferred compensation beyond the obvious, but will do some more research around those.

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Tyler Aspect
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Location: California
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Re: Reduce MAGI

Postby Tyler Aspect » Sat Jul 15, 2017 7:15 pm

You can buy out of money call options, but once capital gains cancels out you can only deduct $3000 per year. Interest income can be deferred by buying one year Treasury Bills.
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TBillT
Posts: 224
Joined: Sat Sep 17, 2011 1:43 pm

Re: Reduce MAGI

Postby TBillT » Mon Jul 17, 2017 7:53 am

LSLover wrote:Itemizing deductions does not affect MAGI.


OK yes I stand corrected...I am trying to do 2 things: reduce MAGI and keep tax bracket lower.


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