We have tips on maximizing your tax-free income:
Despite the best efforts of some politicians, there are still some widely-available ways for individuals to earn federal-income-tax-free income. This is the second of our two-part series on the subject.
If you itemize deductions, your AGI, including long-term gains and dividends, could be even higher, and you would still be within the 0% bracket for those gains and dividends.Capital gains sheltered with capital losses are tax-free When you incur capital losses during the year and/or have a capital loss carryover from a prior year, you can shelter current-year capital gains to the extent of current-year capital losses plus any capital loss carryover into that year.
Here’s the only catch: your right to make CESA contributions is phased out between modified adjusted gross income of $95,000 and $110,000 or between $190,000 and $220,000 if you’re a married joint filer. This restriction can often be circumvented by enlisting someone who is unaffected. For example, you can give the contribution dollars to another trustworthy adult who can open up the CESA as the “responsible person” and make the contribution on behalf of your beneficiary.
Example: If you’re unmarried, you can make a 2022 lump-sum contribution of up to $80,000 to a Section 529 account set up for a child, grandchild or any other person you want to help. If you’re married, you and your spouse can together contribute up to $160,000 . Lump-sum contributions up to these amounts won’t diminish your $12.06 million unified federal gift and estate tax exemption.
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