KraftCPAs PLLC Reviews & Profile

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Retiring soon? Tax challenges might be ahead posted on: May 19, 2023 Are you getting ready to retire? If so, you’ll soon experience changes in your lifestyle and income sources that can have numerous tax implications

Here are four tax and financial issues you might contend with when you retire: Taking required minimum distributions These are the minimum amounts you must withdraw from your retirement accounts You generally must start taking withdrawals from your IRA, SEP, SIMPLE, and other retirement plan accounts when you reach age 73 if you were age 72 after December 31, 2022 If you reach age 72 in 2023, the required beginning date for your first RMD is April 1, 2025, for 2024 Roth IRAs don’t require withdrawals until after the death of the owner

You can withdraw more than the minimum required amount Your withdrawals will be included in your taxable income except for any part that was taxed before or that can be received tax-free (such as qualified distributions from Roth accounts)

To claim the exclusion, you must meet certain requirements For example, during a five-year period ending on the date of the sale, you must have owned the home and lived in it as your main home for at least two years

If you’re thinking of selling your home, make sure you’ve identified all items that should be included in its basis, which can save you tax

Getting involved in new work activities After retirement, many people continue to work as consultants or start new businesses Here are tax-related questions to ask if you’re launching a new venture:

Should it be a sole proprietorship, S corporation, C corporation, partnership, or limited liability company?
Are you familiar with how to elect to amortize start-up expenditures and make payroll tax deposits?
Can you claim home office deductions?
How should you finance the business? Taking Social Security benefits If you continue to work, it can have an impact on your Social Security benefits If you retire before reaching full Social Security retirement age (65 years of age for people born before 1938, rising to 67 years of age for people born after 1959) and the sum of your wages plus self-employment income is over the Social Security annual exempt amount ($21,240 for 2023), you must give back $1 of Social Security benefits for each $2 of excess earnings

If you reach full retirement age this year, your benefits will be reduced $1 for every $3 you earn over a different annual limit ($56,520 in 2023) until the month you reach full retirement age Then, your earnings will no longer affect the amount of your monthly benefits, no matter how much you earn

Speaking of Social Security: You could have to pay federal tax on your benefits Depending on how much income you have from other sources, you may have to report up to 85% of your benefits as income on your tax return and pay the resulting federal income tax

Tax planning is still important As you can see, you might have to make many decisions after you retire We can help maximize tax breaks so you can keep more of your hard-earned money