2019 Withholding & Tax Planning
Posted: Mon Feb 11, 2019 2:27 pm
Hi Bogleheads,
I'm trying to figure out what withholding we should do this year for federal and state taxes. We've got a large refund coming this year, and I'd like to get more of that money over the course of the year instead of in March/April next year.
When I completed the IRS withholding calculator, I got a result that we need to INCREASE our withholding to avoid owing around $6k next year. I suspect I fat fingered something and should try again later.
I'm also looking at IRA contributions for the year and choosing between Roth and traditional, and looking at my spouse's 401k which has a Roth and a traditional contribution option.
I used to put the max IRA contribution/12 into a Roth or a traditional IRA to dollar cost average. But I got burned a few years back with variable income being unexpectedly high making a traditional IRA non-deductible. I did all the paperwork to fix that, but I don't want to do a Roth conversion again. So now I set the money aside and at the end of the year make a deductible traditional IRA contribution or a Roth IRA contribution.
I have no crystal ball on the future tax brackets, but looking backwards, we appear to be in our peak earning years and currently have more than half of our retirement accounts as Roth. I'm leaning towards changing the 401k contributions from Roth to Traditional. I'm leaning towards also making the IRA contributions at the end of the year be traditional if they'll be deductible.
Does that sound reasonable to you?
I'm trying to figure out what withholding we should do this year for federal and state taxes. We've got a large refund coming this year, and I'd like to get more of that money over the course of the year instead of in March/April next year.
When I completed the IRS withholding calculator, I got a result that we need to INCREASE our withholding to avoid owing around $6k next year. I suspect I fat fingered something and should try again later.
I'm also looking at IRA contributions for the year and choosing between Roth and traditional, and looking at my spouse's 401k which has a Roth and a traditional contribution option.
I used to put the max IRA contribution/12 into a Roth or a traditional IRA to dollar cost average. But I got burned a few years back with variable income being unexpectedly high making a traditional IRA non-deductible. I did all the paperwork to fix that, but I don't want to do a Roth conversion again. So now I set the money aside and at the end of the year make a deductible traditional IRA contribution or a Roth IRA contribution.
I have no crystal ball on the future tax brackets, but looking backwards, we appear to be in our peak earning years and currently have more than half of our retirement accounts as Roth. I'm leaning towards changing the 401k contributions from Roth to Traditional. I'm leaning towards also making the IRA contributions at the end of the year be traditional if they'll be deductible.
Does that sound reasonable to you?