Tax/investment advice for charity worker.

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happytraveller
Posts: 3
Joined: Wed Dec 05, 2018 4:25 pm

Tax/investment advice for charity worker.

Post by happytraveller » Wed Dec 05, 2018 5:29 pm

Starting June 2016, I made the investments listed below. I have no home base and travel from project to project volunteering for NGOs around the world. I am not very good at fundraising so most of the expenses are on my own dime, spending around $25-35,000 annually. I'm predicting gross income for 2018 to be around $26k (approx. $1-1.5k will be LTCG from bonds/Wellesley, $3,300 interest income, $22,700 in dividends). Dividends are currently reinvested and I have been drawing from cash kept in a credit union.

My immediate concern is that I will get bumped out of my health plan for earning over $24,100. Will tax loss harvesting will help me reduce my MAGI? I have unrealized losses on the bond funds but want to be sure that I understand this correctly.

My longer term concern is that my portfolio should be more tax-efficient so that I can continue full-time volunteering without compromising my retirement. I claim the standard deduction as opposed to detailing expenses and my accountant tells me that I’m not in a position to further invest in Roths/IRAs. I’m open to increasing my exposure to stocks up to 70-75% if necessary and am not too concerned about panic selling as I would be comfortable waiting it out in countries with low living costs.

I hold both an American and English passport but spend little time in either country.

All advice and suggestions are welcome but I would like to keep it pretty simple so that I can understand what I’m doing and why. Thank you in advance for your time.

Debt: nil
Tax filing status: single
State of Residence: New York
2017 tax bracket 15%
Age: 52
Current Allocation:
Cash
Earning 1.95% $190,000. Intended to invest about 50% of this when market dropped but not convinced it is worth waiting any longer.
Taxable Vanguard Funds $878,914
29% Vanguard Total Stock Market Index fund Admiral VTSAX 0.04%:
18% Vanguard Total International Stock Index Fund Admiral VTIAX 0.11%
10% Vanguard Wellesley Income Fund Admiral VWIAX 0.15%
12% Vanguard Total International Bond Index Fund Admiral VTABX 0.11%
13.5% Vanguard Total Bond Market Index Fund Admiral VBTLX 0.05%
8.4% Vanguard Intermediate-Term Investment-Grade Fund Admiral Shares VFIDX 0.10%
5.7% Vanguard Short-Term Investment-Grade Fund Admiral VFSUX 0.10%
Roth:need to covert to Admiral
0.3% VGTSX 0.17%
0.4% VTSMX 0.14%
Traditional IRA:
1.3% VTIAX 0.11%
1.4% VTSAX 0.04%
Predicted State Pension: Age 67 $1635/Age 62 $1151

livesoft
Posts: 62960
Joined: Thu Mar 01, 2007 8:00 pm

Re: Tax/investment advice for charity worker.

Post by livesoft » Wed Dec 05, 2018 8:57 pm

My immediate thought would be to change your state of residence from NY if you are paying any NY state income taxes.
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happytraveller
Posts: 3
Joined: Wed Dec 05, 2018 4:25 pm

Re: Tax/investment advice for charity worker.

Post by happytraveller » Thu Dec 06, 2018 2:50 am

livesoft wrote:
Wed Dec 05, 2018 8:57 pm
My immediate thought would be to change your state of residence from NY if you are paying any NY state income taxes.
Thank you, for your reply. It crossed my mind but then healthcare becomes complicated if I have to tie it to a state that I don't ever visit. I don't have residency or eligibility anywhere else in the world but I do still pass through NY a couple of times a year and have places to stay there. While I am ok paying for doctors visits in other countries, I need a country of residence for insurance to repatriate me to if needed. If I can lower my MAGI to keep my cheap health plan and stay tax efficient, this may be my best bet for now.

ivk5
Posts: 479
Joined: Thu Sep 22, 2016 9:05 am

Re: Tax/investment advice for charity worker.

Post by ivk5 » Thu Dec 06, 2018 8:08 am

I'm not knowledgeable about ACA MAGI so you'll want to research that yourself or wait for others to comment.

In general TLHing will reduce your regular AGI up to the amount of your other gains plus $3k; additional losses get carried over to the next year. In other words, assuming same LTCG distributions as prior year, you may have $4-4.5k of potential AGI reduction from TLH.

Here's where things get tricky. TLHing reduces your basis. If you have to sell those lots in the future, you may pay CG tax at that time (particularly if it's after you start your pension). If you're very close to the ACA cliff, you'll have to do the math on how potential future CG tax compares to current year ACA premium savings / subsidy. Future CG may not be an issue if you expect to remain in 0% CG bracket, or don't expect to sell during your lifetime, or expect to make charitable contributions using appreciated shares, etc.

I'll second livesoft's suggestion to reconsider NY residence if you are paying significant NY state taxes (hopefully not city too!). But I'm not knowledgeable enough about health insurance alternatives to have a recommendation on that part.

happytraveller
Posts: 3
Joined: Wed Dec 05, 2018 4:25 pm

Re: Tax/investment advice for charity worker.

Post by happytraveller » Fri Dec 07, 2018 4:17 pm

Thank you for the input. Ok, I will look into changing my state of residency.

It is hard to imagine being close to the ACA cliff for the moment (I just need to keep my income low enough to stay within my current plan), but I hadn't considered what future CGs would do to my AGI if and when I need to seriously start selling shares. Good to have that pointed out.

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