Topics

1

Taxes / Dependent care credit vs dependent flex

« on: April 28, 2021, 11:40:04 PM »

This year the dependent tax credit is seeing substantial enhancements. Now it’s up to 50 % of expenses up to 8000 in a refundable credit. Since it’s now 50% vs 20% ... I’m wondering if it makes more sense to to claim the credit vs the dependent flex care account which is now increased to 10,000 I think.

We have already used about 4000 of dependent flex money this year and that will be it. We will end up with about 14000 in childcare expenses. So we could still max out the dependent flex account with the new open season or... should we take the approximate 5000 credit instead?

Our AGI is about 107,000 mfj so we should qualify. Benefits are so great this year I’m considering getting a nanny for our twins instead of daycare since I’m leaving at least 3000 credit on the table.

Summary question: is it now more tax efficient to take the tax credit vs dependent flex account?

2

Taxes / Question on IVF medical bills

« on: March 06, 2021, 07:28:16 PM »

My wife and I did IVF in 2019. Babies were born in 2020. As of 2019, we paid about half and in 2020 we paid the rest on a payment plan.

Unfortunately I didn't think much about tax deductions otherwise I would have concentrated the payments.

My question is...since the medical event occurred in 2019, am I still allowed to deduct medical payments made on the payment plan in 2020? I can't seem to find details on this specific aspect. So example:

2019: IVF treatment. $12,000 cost. 6000 paid
2020: No IVF treatment as babies born $6000 paid this year through payment plan.

Before anyone asks the rest of medical expenses for birth, labor, appointments were covered by health insurance and/or my flexible spending account.

3

Taxes / School, new parents, tax optimization

« on: December 17, 2019, 09:55:01 PM »

So recently I learned my wife was pregnant (yay!!) and then I learned it was twins  (yikes!!!). Needless to say...my future is changing fast. Luckily, the FI journey has got off us to a nice start. Briefly our details:

Joint income: About 130k as of this year
NW: $465k (50k CD's, rest retirement account investments)
Family size: 4 as of July 2020. Just us two now.
Investment vehicles: As I said, very little in taxable except the 50k CD's. However a sizable amount is held in deferred compensation, and a bit in an inherited IRA(40k).
House: None. Renting at about a 40% discount so have not been too eager to leave.

I am considering going back to school. I know it's not a good time as having kids but I have wanted to for awhile and frankly not sure when it's going to be easier. Mostly the reason is a manager which no one tolerates, a rather isolated area, and just a general desire to pursue something I have always wanted to. Besides the merits of all that I am wondering the best way to manage tax consequences and any other ideas you might have. As I understand it there are a lot of different opportunities and tax vehicles to play with during these potential gap years. Can you help me out with any strategic ideas/pitfalls?

-Healthcare not an issue. Wife will be covered and have some parental leave to start us off
-American Opportunity Credit, Child tax credit, Savers credit should all be options
-Tax space to convert....due to me having little/no income and child credits, potential for a lot of tax space
-Plenty of vehicles: inherited IRA, deferred compensation from wife, traditional IRA's, 401k, etc.
-Around 50k cash
-No house...but a bit intrigued by low income housing opportunities(options to buy houses way below market that are nice, premium location due to low income)Note: Strings attached in that resale will be very limited by the community development trust to make it affordable
-No other taxable investments

Mainly my question is where you would start with strategy? I'm a bit bewildered to be honest because as soon as I start to think of a certain conversion strategy I realize it may disqualify me for a credit. Also I noticed that some of the credits are dependent on earned income so it may be critical to ensure I have some earned income. Anyways, any direction or strategic ideas you have would be great. Part of my overwhelm is also the idea of having twins lol. All strategies aside I'm figuring we are going to need more money and more space fast so the idea of efficient living/budgeting seems...tough.

4

Taxes / Considering recharacterizing same year from Roth to TIRA

« on: November 25, 2019, 09:17:32 AM »

I am a little on the fence whether I should take the tax deduction or go Roth. Jeremy, I guess from your articles you would never go Roth so maybe this post is a waste of time LOL. Nonetheless what are your thoughts?

2018, last year, was about what I expect this year. We will probably make a little more income so I anticipate the following:

Total income, joint: $85,000 (this is after maxing out employer retirement accounts, FSA, health insurance, etc)

Potential IRA deduction: $12,000

Would bring AGI down to: $73,000

It may be a bit of a hassle to re-characterize so didn't want to do so unless totally useful. Part of the reason I did some Roth was we are thinking of buying a house soon so I liked the idea of some roth funds being more accessible for a down payment. I realize both can be accessed for a first time home buyer but it just seems easier to not pay taxes later in a situation like that.

Thanks for any help!

5

Travel hacking / Understanding Transfer partners in rural areas

« on: October 14, 2019, 01:51:43 PM »

Ok so as I have said...pretty new to travel hacking and this will be my first year with some points, chase points, cap one miles, and I am considering citi prestige thank you points. I understand that transfer partners is where really cool redemptions can be had. Frankly when I started this...I was happy to just be able to book domestic tickets home to my family for free. However the thought of an epic first class trip to hawaii or something sounds pretty cool.

My struggle is we do not live near SFO or LA or JFK where a lot of these partners originate. So ...I'm confused--how do people access these transfer partners? Is it not so efficient if you live in rural areas? Or if you live in a rural area, do you "position" yourself by for example flying from Montana to Seattle first....and then utilizing a cool redemption?

Or is there a way to redeem Delta using Virgin from my airport if Delta is there? This is the part where I get a little lost. I see redemptions for delta flights using virgin...but I don't get if you still need to have virgin flights or will virgin book anything delta from anywhere?

Hopefully my question makes sense...as a side note for my airport, it pretty much is Delta, United, Alaska Air, and American Airlines. Most of the places we go Delta has the flights that are most efficient. Utilizing the others would be an extreme waste of flying time. Alaska does work well heading west though which we sometimes do.

Thanks for any help!

6

Travel hacking / Next card. Go premium or capital one venture?

« on: October 06, 2019, 04:50:26 PM »

So as I said in my last post...we have some IVF expenses so I am doing my best to maximize the minimum spend/bonus factors. We live in the midwest/mountain area so travel partners are challenging and we are heavily limited to delta flights or alaska.

So far we have utilized delta gold cards, alaska air, chase preferred, chase freedom unlimited, and my wife got the capital one venture. Since she has the capital one venture and is getting global entry, I figured I should too. But...here's the thing: we really are spending a lot in travel expenses. I kinda regret not getting the CSR over CSP because we are definitely going to use $250 to $500 in travel credits over the next year. But what's done is done...so I have other options, though maybe not as good.

We have plenty more in IVF expenses so I am trying to hit the best minimum spends.

1.) Citi preferred. $250 travel credit. Some other perks. Citi points bonus, of the points I know little about. 50,000. Global entry.
2.) Capital One venture. 50,000. Travel eraser. Global entry.

I guess the question is...is it worth it to go for premium travel cards if you can justify the travel credit? I feel like in the first year it could make a lot of sense for us. We already have $200 in car rental we have to book, possible baggage fee in 2019 so that would pretty much cover us with an uber or two. In 2020 we will get another travel credit, which we will definitely use for more flights home...effectively making the $500 Citi fee a null fee. Like I said I think I wish I woulda done the CSR for this reason but this could make up for it.

The Amex for me doesn't seem to be a good option because the travel incidental credit is ....just not a lot of value for me. Most of the time I can get free baggage fees(delta gold) and all the other incidentals I would rarely use.

What are your thoughts on my two options? Am I overestimating the value of holding a premium travel card? Should I just go with the capitalone, utilize global entry, and erase my car rental and baggage fees with the travel eraser?

Thanks!

7

Travel hacking / Costco Travel hack (Car rental)

« on: September 21, 2019, 10:36:26 AM »

Since I got so much help from Jeremy wanted to share this little hack for the community. It's not really points based but I have saved hundreds of dollars a year on car rentals.

1.) Have to have Costco membership. If you rent a car for a vacation at least once a year for even a few days you can pay for this membership

2.) Book a car rental through costco travel portal 1-2 months ahead of time if possible

3.) Check every week, mid-week for lower rates

4.) Costco allows you to cancel at any point, so you just cancel the other and rebook

I know this doesn't sound that fancy but it's been incredible to me the savings I reaped. When you book with costco they never hold you r card. In fact I have literally not cancelled and the reservation just goes into the either cuz I didn't pick it up.

Just an example...I have an upcoming rental for 2 weeks. I booked a week ago and was able to get prices for $380 for two weeks. I checked back in a couple days and it had already dropped...just 10 bucks so I booked it again, cancelled the old one. Now I look at the rates and they are still far out, but are at $800.

5.) When you get closer to the actual day of the trip, check again. A lot of times the rentals won't sell so the rates just keep dropping.  Again I did this on a trip to hawaii...started out with a rental cost of around $800, got it down to 500, then later 300-400.

8

Travel hacking / IVF coming up, which credit cards should I use

« on: September 14, 2019, 10:29:01 AM »

Well unfortunately we are going down the IVF road. We will be spending $10k to $20k pretty easy in the next 3-6 months. I would like to leverage the racking of travel cards as much as I can....I am pretty new to the game and slightly conservative but like I said since we are spending so much on flights, medicine, and doctor bills...would love to get some bonuses. Here are the options I am toiling with and here is what I have used already.

Delta Gold. Already have. We mostly fly delta so both my wife used/maximized this. I will be downgrading both soon.

Marriott. Both wife/I have used. Will be downgrading or cancelling soon.


Here are my best options as I can see:

1.) Alaska Air. Wife used. I haven't. She could refer me and I could get bonus.....or I got an email to have the annual fee waived.

2.) Chase Sapphire Preferred. My wife just got this for a big car repair we had. We already got the bonus. Option would be for me to go the Chase route--perhaps from a referral from her? The only thing I don't love about this is I prefer to stagger the annual fees a bit more...like I would have rather waited 6 months on this one. Also I noticed that the miles disappear if you lose the credit card--not 100% sure I will have the chance to use the miles within the year as we have yet to use her miles(or chase points or whatever).

3.) Capital One Venture. This seems like a good card and I do like that the annual fee is waived. Neither of us have done this one yet.



Any help would be appreciated!! Thanks. If you want to let me know about any more advanced strategies I can try to follow but like I said I am kinda new to the game and mostly just have been trying to get bonuses twice a year between my wife/I.

9

Taxes / Recharacterization within same year

« on: April 08, 2019, 06:34:34 PM »

I am probably on the cusp this year of qualifying or not qualifying for a traditional IRA. I would like to go ahead and front load one of the accounts as I have future uses for the Roth. I have some increases in income that are possible that might bump me out of qualifying for a traditional IRA. So that being said...is it a mess to recharacterize? Part of me just thinks I should stop hemming and hawing, put in Roth, and I can always change later/end of year if my income turns out to be lower. Make sense?

10

Taxes / Traditional ira or roth?

« on: March 24, 2019, 10:04:24 PM »

In the past my wife and I have done the following to reduce our approximate $123k gross income down to AGI of about $70k.

TSP traditional, max out 18500
State deferred comp 18500
Traditional IRA his/her, 11000

flex accounts not relevant but including for clarity (2650+2650)
=-=-

The plan is to do the same maxing out of employer accounts this year and up to 19000 each as it is raised. This will qualify us for traditional IRA's again. Our effective tax rate for federal is about 5% by my calculations. It seems pretty small. Are we wasting opportunity by deducting as such again? Should we be putting at least one of the chunks of $6000 in Roth? As an example if we had done all Roth in 2018, we would have paid about $1400 more in federal taxes.

I estimate that in 2019, if I were to separate off a Roth we would pay about $700 more. If we did all Roth I think we would pay $1400 more. I have been hesitant to do so as I would pretty swayed by the madfientist and go curry cracker articles which highly favor traditional tax deduction and later conversions. I may be going back to school soon so I was seeing some opportunities for roth conversions at low tax rates. That being said if we are at a 5% effective rate now maybe it doesn't get much better.
 
Any help is appreciated. Note I didn't include state taxes for simplification reasons but the state runs roughly 60% of what the federal tax is.

Thanks for any help!

11

Taxes / Thanks GCC

« on: March 25, 2018, 09:11:11 AM »

GCC,

Thanks to your posts in the last few years my AGI went down almost $25,000! I almost cut my tax bill in half! Additionally, my Networth has just about tripled in that timeframe.

How I did it:
-Realizing wife 457 is magic(I actually have to give special thanks to Millionaire educator on this)
-Realizing I should do traditional TSP not Roth
-By doing the above strategies I kept our MAGI low which keeps us into the qualifying range for traditional IRA's, thereby saving us more in taxes
-We have a fair amount of medical expenses so we almost max out flexible spending accounts(about $5000)

Any other thoughts on what what we could do? I have consider HSA's on the next phase but considering we have such high medical expenses I have been reluctant to enter a HDHP. I have it on my plan but my wife doesn't and her employer tends to pay a little more for health insurance.

If we don't do HSA's we hope to delve into taxable accounts soon....but for now my wife is pushing me to spend a little more money on fun stuff !!

12

Travel hacking / Delta miles

« on: March 25, 2018, 09:05:53 AM »

Given our central location and mostly midwest travel we end up needing to use Delta the most. We are new to travel hacking and started with Delta cards. We have about 100,000 miles on my account and 40,000 on hers. Unfortunately in my early days I did stupid 1:1 valuations and effectively wasted 50,000 miles on her accounts. Now I see that the real value is in getting $1500 tickets for 50,000 miles.

My first question is does anyone have any other ideas on how to rack up Delta miles after the cards are used up? Is it worth it to go Chase to transfer the points? I assumed there were some fees there.

My second question is how far ahead do you search for redemptions? Can you ever be too far ahead? The reason I ask is I had gotten pretty excited when we were booking some tickets to Lisbon and I saw that there were tickets with a price of $1500 with mileage redemptions of only 60,000 miles!! I even found one that had short layovers and ideal departure times. I was a few miles short as I didn't realize what a pain it is to transfer miles from account to account(though I could move my wife's miles over without expense). Long story short--now those seats are gone and the ones available are less attractive.

Given that I am looking almost 9 months out right now....am I looking TOO far ahead? Does it pay to just keep an eye on that timeframe as they may actually add more redemptions? Or....in the land of redemptions do you really need to be booking 10-12 months ahead? I have noticed some will say "just 2 seats left" and I am surprised at this time horizon.

Hopefully my question isn't too rambling but I guess I am just looking for strategies on searching for the redemptions. My second question would be any strategies on getting delta miles...so far we have done two gold cards and a starwood card. We will do one more starwood card soon but wasn't sure if we could use Chase for delta miles?