Chapter 2
Key Tax Mitigation Strategies
Roth IRA Conversions: Converting traditional IRA funds to a Roth IRA allows you to pay taxes at current rates, enabling tax-free growth and tax-free withdrawals in the future, which helps manage tax brackets.
Diversify Taxable Income: Maintain a mix of taxable accounts, tax-deferred accounts (401k/IRA), and tax-free accounts (Roth) to control your taxable income level annually.
Strategic Withdrawals: Proactively manage Required Minimum Distributions (RMDs) which start at age 73 or 75, as these can significantly increase your taxable income.
Qualified Charitable Distributions (QCDs): If you are over 70, directing IRA funds directly to charity can satisfy RMDs without adding to your adjusted gross income.
Municipal Bonds: Investing in municipal bonds can provide tax-exempt income at the federal level, and in some cases, state levels.
Capital Gains Management: Holding investments for over a year allows them to be taxed at lower long-term capital gains rates (0%, 15%, or 20%) rather than higher ordinary income rates