11/20/2023 0 Comments Tax bracket percentages 2017Obviously, 2026 is less than five years from now. This guide explores various strategies for how to pay as little tax as possible over your lifetime. You can learn more about those by reviewing our Tax Reductions Strategies Guide. Roth conversions are just one example of tax planning strategies. Our CFP® professionals work closely with our in-house CPAs to look over financial plans from a tax planning perspective. Looking at Various Tax Planning Strategies There are additional rules as well, so make sure you always consult your CFP® professional before withdrawing funds from your Roth account to avoid unintended taxes and penalties. If all your principal is distributed before age 59½, any earnings distributed from the account are subject to a 10% early withdrawal penalty. Once this five-year period is met, you can access principal of the Roth account even if you have not yet reached age 59½. Remember that the Roth money can’t be taken out penalty free for the first five years after initial funding, regardless of your age. Going to higher tax brackets just makes the tax-free income from Roth conversions that much more appealing. 1 on our list of 8 Ways to Prepare for a Recession earlier this summer (and you probably know by now that we’re technically in a recession). You might have noticed that we’ve discussed Roth conversions quite a bit in a lot of our recent content. Hopefully, those numbers can help illustrate the importance of taking advantage of the current (lower) tax rates. Now, let’s review the tax brackets from 2017 in Figures 2 and 3 to see what we can expect in 2026.įIGURE 2 – 2017 Tax Brackets for Single Filers – Tax FoundationįIGURE 3 – 2017 Tax Brackets for Married Filing Jointly – Tax Foundation Why It Makes Sense to Consider Roth Conversions with Tax Rates Sunsetting in 2026 First, Figure 1 shows the current tax brackets.įIGURE 1 – 2022 Tax Brackets – Tax Foundation Let’s look at the 20 tax brackets to see what bracket you would fall into in 2026. While we can only hope that inflation will be in check again by 2026, an inflationary environment would no doubt make matters that much worse. With tax rates rising, your net income will likely decline. The simple answer to why tax rates sunsetting in 2026 matters for you is that all tax rates will be going up. START PLANNING Tax Rates Are About to Go Up By clicking the “Start Planning” button below, you can begin building your financial plan with the same financial planning tool that our CFP® Professionals use. As we look at the tax rates of 2022 and what they’re projected to be in 2026 (the same rates from 2017), you’ll see why the time to act is now.īefore we break down the numbers of the tax rates sunsetting in 2026 and why that matters for you, we encourage you to take the information we’re about to share and go one step further by utilizing our industry-leading financial planning tool. While 2026 might seem like it’s way down the road, there’s a reason why we focus so much on tax planning at Modern Wealth Management. Well, the tax rates from the TCJA are still scheduled to sunset in 2026, so that what-if scenario we discussed a year ago is looking more and more likely. Last fall, we published an article titled, What If We Go Back to Old Tax Rates? By old tax rates, we’re talking about the tax rates from 2017 that were in place prior to the Tax Cuts and Jobs Act. It’s All About Paying the Least Amount in Taxes Over Your Lifetime, Not in a Single Year.Yet Another Reason to Consider Roth Conversions.Comparing the Current Tax Brackets of the Tax Cuts and Jobs Act to the Ones of 2017 (That’s What We’re Going Back to in 2026).Key Points – Tax Rates Sunset in 2026 and Why That Matters Tax Rates Sunset in 2026 and Why That Matters
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