CSS Tax Planning for Retirees 2

Question 1

What is the net investment income tax (NIIT) rate and when does it apply to retirees?

Accepted Answer

3.8% on net investment income for those with modified AGI exceeding $200,000 (single) or $250,000 (MFJ)

Answer

The NIIT applies a 3.8% surtax on net investment income (interest, dividends, capital gains, rental income) for taxpayers with MAGI above $200,000 (single) or $250,000 (married filing jointly).

Question 2

Which tax-efficient retirement income source is NOT included in Medicare IRMAA income calculations?

Accepted Answer

Roth IRA qualified distributions

Answer

Qualified Roth IRA distributions are not included in modified adjusted gross income (MAGI) and therefore do not affect IRMAA surcharge calculations for Medicare premiums.

Question 3

What is tax-loss harvesting, and how can it benefit a retiree's taxable portfolio?

Accepted Answer

Selling positions at a loss to offset capital gains and potentially reduce ordinary income by up to $3,000 per year

Answer

Tax-loss harvesting sells securities at a loss to offset realized capital gains, and any excess losses can offset up to $3,000 of ordinary income per year, with remaining losses carried forward.

Question 4

How is the long-term capital gains tax rate for a married couple filing jointly with taxable income of $90,000 in 2024?

Accepted Answer

0%

Answer

In 2024, the 0% long-term capital gains rate applies to married couples filing jointly with taxable income up to $94,050, meaning many retirees pay no tax on long-term capital gains.

Question 5

What is the 'widow's penalty' (or widow's tax trap) in retirement tax planning?

Accepted Answer

The jump to a higher tax bracket when a spouse dies and the survivor files as 'single' instead of 'married filing jointly'

Answer

The widow's penalty occurs when a surviving spouse loses the wider married filing jointly brackets and pays higher taxes on the same income under the narrower single filing brackets.

(CSS) Certified Senior Specialist Practice Test

(CSS) Certified Senior Specialist Practice Test

CSS Tax Planning for Retirees 2