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:
- 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),
- Select one of those thresholds, and
- Manage your income in such a way to keep your income below that threshold.
Written By: Mike Piper, CPA
Published By: www.obliviousinvestor.com