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Bill, Enrolled Agent
Category: Tax
Satisfied Customers: 3151
Experience:  EA, CEBS - 35 years experience providing financial advice
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I am 56. Received a lump sum severance package this year and

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I am 56. Received a lump sum severance package this year and want to know my options to reduce taxable income in 2009. Up until 9/1 severance date I had contributed to 401k at 12% level.
Submitted: 7 years ago.
Category: Tax
Expert:  Bill replied 7 years ago.
How much was the lump sum payment? What will be your gross income this year including the lump sum? Are you married? If so, does your spouse participate in an employer sponsored retirement plan?
Customer: replied 7 years ago.
I am a bit reluctant to share income details over the internet. Suffice it to say this will push us to the 38% tax bracket for 2009. I am married. My wife contributes to a 403b plan (she is a teacher) and participates in the state teachers retirement plan which is employer sponsored.
Expert:  Bill replied 7 years ago.

So assuming your AGI is in excess of $109,000 then you would not be eligible for deductible IRAs. If your wife is not maximizing her contributions to a 403(b) then she could increase her deferrals which will reduce her taxable income and your overall joint AGI. If she is over age 50 then she can defer up to $22,000. If she has worked there for more than 15 years then she may also be able to contribute an additional $3,000 catch-up depending on the amount of her total contributions over the years she has worked there. If her employer also offers a 457(b) plan then she could defer another $22,000 to that plan. However, with only 3 months left in the year then she would be limited to deferring up to her remaining salary income for the year.


If you intend to obtain another job or start your own business then you may be able to defer part of your salary to another employer's plan or start a retirement plan for your business.


If you itemize deductions you may consider prepaying certain expenses this year so that they may be deductible this year (real estate taxes due in 2010, doubling up charitable contributions, etc.). If you have losses on investments, then you could sell those investments and deduct up to $3,000 of losses that exceed your gains against your other income.

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