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I've always heard about how rich people can manipulate their finances to greatly reduce their tax burden to far below what many people feel is their fair share.
I have now done the same, only by being "poor." Here's how:
1) Make so little money that I can't afford to contribute to my retirement funds.
2) Make it look like I made even less by contributing to non-Roth retirement funds, using savings from other years when I had more money.
3) Contribute even more to my favorite Roth retirement funds, also using money from past savings.
4) Get the "saver's credit" designed to encourage poor people to save for retirement.
I've gotten the saver's credit before, but my income was always so high that I could get only 10% of the first $2000 contributed. This year I was able to make it so that I qualified for the maximum credit: 50% of the first $2000 contributed. That amount was more than all the taxes I had paid in already, so I got those all back.
Truly poor people, especially those with kids, can often qualify for "refundable" credits and actually pay negative taxes. At least I didn't do that this year.
My apologies and thanks to those of you who are paying federal taxes this year. I'm pretty sure I will go back to paying them again next year. Definitely all the years after that. (The credit is for "earned income" used to fund retirement accounts, and I won't have earned income after this year because pensions don't qualify. And if for some reason I do have earned income, that will be in addition to my pension, so not even the federal government will think I could be poor.)
I have now done the same, only by being "poor." Here's how:
1) Make so little money that I can't afford to contribute to my retirement funds.
2) Make it look like I made even less by contributing to non-Roth retirement funds, using savings from other years when I had more money.
3) Contribute even more to my favorite Roth retirement funds, also using money from past savings.
4) Get the "saver's credit" designed to encourage poor people to save for retirement.
I've gotten the saver's credit before, but my income was always so high that I could get only 10% of the first $2000 contributed. This year I was able to make it so that I qualified for the maximum credit: 50% of the first $2000 contributed. That amount was more than all the taxes I had paid in already, so I got those all back.
Truly poor people, especially those with kids, can often qualify for "refundable" credits and actually pay negative taxes. At least I didn't do that this year.
My apologies and thanks to those of you who are paying federal taxes this year. I'm pretty sure I will go back to paying them again next year. Definitely all the years after that. (The credit is for "earned income" used to fund retirement accounts, and I won't have earned income after this year because pensions don't qualify. And if for some reason I do have earned income, that will be in addition to my pension, so not even the federal government will think I could be poor.)