Taking a career break in 2023- what are some tax savings opportunities to take advantage of?

Submitted by hackintosh_dude t3_zzed0p in personalfinance

Like the title implies, wife and I will likely be taking the entire year off and likely will make no w2 income.

We were relatively high earners so we got priced out of a lot of different savings but with virtually zero income, what are some opportunities to take advantage of at a lower tax bracket? I imagine due to investment dividends/interest/etc, we may make about $20k or so. We have one young child.

Some thoughts were solar panel credits, healthcare marketplace, being able to contribute to a deductible traditional IRA again…. What else?! Love to get some thoughts flowing!

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Ltjenkins t1_j2b3uny wrote

Is your w2 income going to be 0 or virtually 0. If it’s actually 0 then you won’t be able make ira contributions which are limited to the lesser of the annual cap or earned income.

You could do some Roth IRA conversions while your taxable income is low.

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plowt-kirn t1_j2b62pe wrote

> being able to contribute to a deductible traditional IRA again…. What else?!

Earned income is required to be able to contribute to an IRA. So if you literally have $0 income in 2023, there's no IRA contributions.

However consider doing Roth conversions, provided you have money saved up to pay the taxes.

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maedocc t1_j2b6bcj wrote

>healthcare marketplace

If you live in a state that has expanded Medicaid, you should be able to get on income-based Medicaid -- i.e. free health care.

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eckliptic t1_j2b7axi wrote

If you have any money in a trad IRA, this is a great time to do a Roth IRA conversation.

You definitely can not contirbute to a trad IRA and if you were low income you'd much rather contribute to a roth IRA if your future income is going to rise again.

You mentioned you were high earners in the past and have not been able to "deduct" trad IRA contributions. Does that mean you've been doing backdoor roth converstions already?

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mlachick t1_j2b9zpd wrote

Solar credits are not income-limited. At all.

You might be able to use your low income year to qualify for low income green incentives, however. This would probably be something for 2024 when you can document your low income with your 2023 tax returns. There are state programs available (I'm getting nearly $13k off of my solar project). By the time you can use it, the High Efficiency Electric Home Rebate program should be up and running.

Other stuff you'll qualify for include the full child tax credit, but you don't have to do anything special to get this.

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