As a retired couple, my wife and I look forward to a huge distribution of taxable income (>$100k). As our income - gross is usually in the $40K range, this additional +$100k puts me in a much higher tax bracket. Is there a way - legally to spread out this income over several years and enjoy a lower Federal Income Tax bracket and still use this lump-sum windfall to invest in any securities that answer my criteria?
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Can you be more specific about the income increase? Because that will guide tax minimumize strategies. Is it sale of a business? Lump sum retirement distribution? Unused vacation and sick days? Sale of investment?
No, unless you qualify for lump-sum retirement distribution averaging as described in IRS Publication 575.
-- Phil Marti Clarksburg, MD
It depends.
Will the payer agree tpo pay you in installments?
This is especially popular when taking back a mortghage on sale of real estate. In such cases you recognize gain only as you are paid. __ Art Kamlet ArtKamlet @ AOL.com Columbus OH K2PZH
No. All forms of income averaging went out long ago (except for Farmers), but you don't say when it will occur, nor whether it's salary-bonus or long term capital gain, or short term capital gain, or pension distribution, or what. Aso are you on withholding or dio you pay installments? With more information we could give you more specific advice. If it's this year, you'll pay the tax on it by April 15,
2007. If it's in 2007 pay your 2007 installments on the basis of 1/4 of year 2006 tax, then pay the tax on the windfall in April 2008. Then for 2008 revert to either estimating full year's income/tax to pay 90% of 1/4 of it each quarter, or use the Annualized Income Method to figure your installments. edHave something to add? Share your thoughts — no account required.
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