Ways to lower 2021 AGI?

[Mrs. Dinero]

We have some extra cash. We were hoping to max out DH’s 401k since I can’t contribute to mine for another 10 months at new company. We were too late this year for that. Anyway to use this money to lower our AGI for 2021? We already max Roth IRAs outside 401ks

[plugginaway22]

Do you have an HSA to max?

[haapai]

My only suggestion would be to crank up your husbands contributions to his 401(k) to the maximum percentage of income allowed by the plan.  It might go into effect fast enough to affect one or two paychecks of 2021.  You're basically right that it is too late in the year to do much. 

It might be time to start thinking of your 2022 strategy instead.  Have you considered the strategy of setting his 401(k) contributions high enough that he will hit his maximum annual contributions right about when you are allowed to contribute to a 401(k)? 

ETA:  Maxing out his plan early in the year may affect his employer match or the timing of his match and the vesting of it. 

[Mrs. Dinero]

Dec 9, 2021 11:12:40 GMT -5 plugginaway22 said:

Do you have an HSA to max?

No, we don’t

[haapai]

I was a bit sloppy when I discussed that 2022 strategy.  It is not necessary to max out your husband's 401(k) contributions early or hit his annual max in 2022.  I really should have suggested temporarily increasing his 2022 contributions to soak up the excess cash until you became eligible to contribute to your 401(k).  There's probably a way of setting his 401(k) contributions higher than normal in the first nine months of the year and then dropping down to the amount that maximizes the match.  Hitting his annual match for the year is a limitation, not a goal.  The goal is to reduce the AGI on your joint return by using the tax-favored retirement vehicles that are available to you. 

[giramomma]

donate to charity?

[Deleted]

Dec 11, 2021 16:38:44 GMT -5 giramomma said:

donate to charity?

Nope- doesn't affect AGI unless you make an RMD from your IRA directly to a charity.   There are very few ways to reduce your AGI and it's not a function of anything you can write off as itemized deductions.  That's why AGI (or Modified AGI) is used as the basis for so many tax-related calculations. 

[Regis]

We have reduced our taxable income as much as possible by maxing out 401(k), HSA, etc.  We look next at any credits, which are limited on the federal side.  However, we can receive credits for 529 contributions and donations to state colleges in Indiana, so we max those as well.  Take a look and see if you can do something similar.

[jerseygirl]

Just this year realized charity donations don’t help with decreasing agi. Extra Medicare payments IRMAA based on agi. So was this year only to donate one month RMD to charity. In 2022 will make sure to send some RMDs in amounts we usually just donate
Thinking that will prevent IRMAAs

[Deleted]

Dec 12, 2021 9:56:25 GMT -5 jerseygirl said:

Just this year realized charity donations don’t help with decreasing agi. Extra Medicare payments IRMAA based on agi. So was this year only to donate one month RMD to charity. In 2022 will make sure to send some RMDs in amounts we usually just donate
Thinking that will prevent IRMAAs

Yes, that's one very good way to lower your AGI.  I'm not at the age where I need to make RMDs yet but that will definitely be a tactic I'll use.  I think you can actually start doing it before you have to make RMDs- at age 70.5, where the RMD age is now 72.  It's called a QCD (Qualified Charitable Distribution).  I hope it's still an option when I hit 70.5 in 2023.

[Lizard Queen]

Do a tIRA instead of a Roth

[Deleted]

To lower my AGI, I contribute the maximum to both my HSA and Traditional IRA. In 2020 and 2021, charitable contributions lowered my AGI. It is line 10b on the 1040. Line 11 is your AGI.

www.irs.gov/newsroom/year-end-giving-reminder-special-tax-deduction-helps-most-people-give-up-to-600-to-charity-even-if-they-dont-itemize

IR-2021-214, November 3, 2021



WASHINGTON — The Internal Revenue Service today reminded taxpayers that a special tax provision will allow more Americans to easily deduct up to $600 in donations to qualifying charities on their 2021 federal income tax return.



Ordinarily, people who choose to take the standard deduction cannot claim a deduction for their charitable contributions. But a temporary law change now permits them to claim a limited deduction on their 2021 federal income tax returns for cash contributions made to qualifying charitable organizations. Nearly nine in 10 taxpayers now take the standard deduction and could potentially qualify.