3 Important Tax Questions to Answer This Year SHP Financial

As we approach Tax Day, you may be gathering your important documents and preparing to file or file for an extension. Once you have everything sorted out, it’s important to consider how your tax situation could change as you near and enter retirement. Here are three important tax questions to answer this year.

Why May I Need to Adjust My Withholding? 

Marriage, divorce, and your children leaving the nest can mean that you need to adjust your withholding. You may need to do so once you can no longer claim the child tax credit. If you qualified for the earned income tax credit in the past, check to see if you still qualify based on your number of eligible children and income.[1] If one spouse is earning more income than last year, your overall household withholding may increase. But, if one spouse retires, your overall withholding could potentially decrease. If you are divorced, keep in mind that alimony payments are no longer tax deductible for the payer, and recipients no longer have to declare payments as income.[2]

If you’ve gone from working two jobs to one, you might have to adjust your withholding. You can’t claim the same allowances for both jobs, but you may split allowances between the two. If you go from working two jobs to working one, you might be able to claim more allowances on your remaining job.[3]

What Tax Breaks Might I Be Able to Take Advantage of Now?

The standard deduction goes up $1,700 once you turn 65 for single taxpayers and goes up $2,700 for married couples filing jointly if both are 65 or older. Whether or not you itemize, you may be able to contribute more to your 401(k) or IRA once you turn 50. You can contribute an additional $1,000 to an IRA per year starting at age 50 and an additional $6,500 to a 401(k) starting at age 50. If you’re self-employed, you may be able to deduct Medicare Part B and D premiums, plus the cost of Medigap policies or Medicare Advantage plans.

Why Do I Need to Worry About Taxes in Retirement?

While some people think their tax bill will decrease substantially in retirement, this isn’t necessarily the case. Many of your sources of income in retirement could be taxable, including Social Security benefits, pension payments, and investment income. And with mounting national debt and the expiration of the Tax Cuts and Jobs Act in 2025, we could see tax rates increase. It’s important to have a tax minimization plan built into your retirement plan, and we can help you with that. Click HERE to sign up for a time to talk to us at SHP Financial about your current tax situation and how it might change during retirement.

[1] https://www.irs.gov/help/ita/whom-may-i-claim-as-a-dependent
[2] https://www.irs.gov/individuals/employees/tax-withholding
[3] https://www.irs.gov/taxtopics/tc410


The content presented is for informational purposes only and is not intended as offering financial, tax, or legal advice, and should not be considered a solicitation for the purchase or sale of any security. Some of the informational content presented was prepared and provided by Lone Beacon Media, LLC dba Lone Beacon, while other content presented may be from outside sources believed to be providing accurate information. Regardless of source no representations or warranties as to the completeness or accuracy of any information presented is implied. Lone Beacon Media, LLC is not affiliated with the Advisor, Advisor’s RIA, Broker-Dealer, or any state or SEC registered investment advisory firm. Before making any decisions you should consult a tax or legal professional to discuss your personal situation.

Investment Advisory Services are offered through SHP Wealth Management LLC., an SEC registered investment advisor. Insurance sales are offered through SHP Financial, LLC. These are separate entities, Matthew Chapman Peck, CFP®, CIMA®, Derek Louis Gregoire, and Keith Winslow Ellis Jr. are independent licensed insurance agents, and Owners/Partners of an insurance agency, SHP Financial, LLC.. In addition, other supervised persons of SHP Wealth Management, LLC. are independent licensed insurance agents of SHP Financial, LLC. No statements made shall constitute tax, legal or accounting advice. You should consult your own legal or tax professional before investing. Both SHP Wealth Management, LLC. and SHP Financial, LLC. will offer clients advice and/or products from each entity. No client is under any obligation to purchase any insurance product.

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