274 | Tax Planning 2020 | Sean Mullaney

<div class= "elementor-element elementor-element-15da9379 elementor-widget elementor-widget-theme-post-content" data-id="15da9379" data-element_type="widget" data-widget_type= "theme-post-content.default"> <div class="elementor-widget-container"> <ul> <li>It's end-of-year tax planning time. As you get further along in your financial independence journey, there are likely more end-of-year tax planning items you'll need to be aware of. Having a checklist to review annually is useful.</li> <li>It's been an unusual year and December is that time to begin making end-of-year tax considerations. In addition to the normal checklist, there may be additional items to consider in this remarkably different year.</li> <li><strong>Sean</strong> Mullaney says unique to 2020 are Roth conversions. While Roth conversions should be on the checklist every year, this year there was a much greater chance of diminished income which may provide the opportunity to make Roth conversions in a lower marginal income tax bracket.</li> <li>In any year when income is much lower than it normally is, Roth conversions would be at the top of your mind. The deadline is December 31 and there are no extensions.</li> <li>While complex situations may benefit from professional consultations, anyone with mostly W2 income can find their tax brackets online. If your income has dropped from 22-24% to 10-12%, locking in a Roth conversation at that lower rate is effective tax planning.</li> <li>A Roth conversion is when you go into a traditional IRA account and convert it to a Roth IRA. This is a taxable event, but you are intentionally choosing it because you are in a lower tax bracket for the year rather than convert or withdraw funds in a letter year when your income is higher and the taxes will be higher.</li> <li>How much money should be converted to a Roth IRA? <strong>Sean</strong> says he has never encountered a client who has had too much money in a Roth IRA. While the action is irrevocable, there is no penalty for converting too much. If a portion of