There’s a common idea that tax planning is a very precise mathematical procedure.

Some parts of it are.

But there’s also a fair bit of guessing going on.

For instance, with retirement tax planning, the process each year is usually to:

  1. Identify the various income thresholds at which your marginal tax rate would increase (i.e., points at which the next dollar of income would be taxed at a higher rate than the prior dollar of income),
  2. Select one of those thresholds, and
  3. Manage your income in such a way to keep your income below that threshold.

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Written By: Mike Piper, CPA

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