6 smart moves for retirees to make now to save on next year's taxes

Core Insights - The article discusses strategies for Roth IRA conversions, particularly during market downturns, to minimize tax liabilities and maximize tax-free growth potential when markets recover [1][3]. Group 1: Roth IRA Conversions - Converting to a Roth IRA while asset values are low can lead to lower tax bills on the conversion amount, with potential for tax-free growth as markets rebound [1]. - It is advisable to work with an accountant or financial adviser during the Roth conversion process to navigate complexities [1]. - Roth conversions increase adjusted gross income, which can impact Medicare premiums and Social Security taxation [2]. Group 2: Tax Planning Strategies - Individuals should estimate total income, including Social Security, pensions, dividends, and capital gains, to determine their federal tax bracket for 2026 [4]. - Retirees are encouraged to start planning for their 2026 tax bill now, as strategic planning can help reduce future tax liabilities [5]. - It is recommended to convert just enough funds from traditional retirement accounts to stay within the 12% tax bracket [2]. Group 3: Required Minimum Distributions (RMDs) - Skipping RMDs can result in significant tax penalties, with penalties ranging from $1,160 to $2,900 [8]. - RMDs are mandatory withdrawals for individuals aged 73 and older, with specific rules on timing and amounts [9][10]. - Automating withdrawals and consulting with accountants can help manage RMDs effectively [11]. Group 4: Charitable Contributions and Deductions - Qualified Charitable Distributions (QCDs) allow individuals to donate up to $111,000 from their traditional IRA directly to charities, reducing taxable income [15]. - The standard deduction for tax year 2026 will increase to $16,100 for single filers and $32,200 for married couples filing jointly [16]. - Utilizing the higher SALT deduction limit of $40,000 can significantly impact taxable income, especially for retirees in high-tax states [18][19].