Unanticipated Consequences of Taxable Income Increases: Lessons for Retirees

Understanding the role of adjusted gross income (AGI) in computing taxable income is crucial to providing good tax and financial planning, especially for retirees. Not every financial planner will be a tax expert but understanding some of the interactions between income items and what type of taxes...

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Bibliographic Details
Published in:Journal of financial service professionals 2023-01, Vol.77 (1), p.32
Main Author: Livingstone, Jane R
Format: Article
Language:English
Subjects:
Financial planning
Income taxes
Medicare
Retirees
Taxable income
Online Access:Get full text
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Summary:Understanding the role of adjusted gross income (AGI) in computing taxable income is crucial to providing good tax and financial planning, especially for retirees. Not every financial planner will be a tax expert but understanding some of the interactions between income items and what type of taxes and costs might be incurred as the result of a transaction is essential. For example, because of a bright-line cutoff, just one ad-ditional dollar of modified AGI (MAGI) can trigger an additional $4,351.20 in Medicare Part B premiums. This article reviews the federal income tax formula and discusses some specific income items, including how changes in one item affect other items. It provides examples of some of the additional taxes and costs that can be incurred.
ISSN:1537-1816
2381-8875